1 / 5

CHAPTER

CHAPTER. 21A. APV Approach to Leasing. Appendix 21A: APV Approach to Leasing. APV = All-Equity Value + Financing NPV. Calculations shown on the following slides will show that for the latest Clumzee Movers example (where the tax rate is 25%) APV = $591.38 – $1,135.30 APV = –$543.91

sheri
Télécharger la présentation

CHAPTER

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. CHAPTER 21A APV Approachto Leasing

  2. Appendix 21A: APV Approachto Leasing APV = All-Equity Value + Financing NPV Calculations shown on the following slides will show that for the latest Clumzee Movers example (where the tax rate is 25%) APV = $591.38 – $1,135.30 APV = –$543.91 Which is the same value as the easier NPV analysis.

  3. 5 $ 5 , 900 å = - = All - equity val ue $ 25 , 000 $ 591 . 38 t ( 1 . 06667 ) = t 1 Appendix 21A: APV Approachto Leasing APV = All-Equity Value + Financing NPV • To find the all-equity value, discount the cash flows at the pre-tax interest rate. The after tax rate was 5% which implies a pretax rate of 6.66% = 5%/(1-.25). Cash Flows ClumZee Movers: Leasing Instead of Buying Year 0 Years 1-5 Cost of truck we didn’t buy $25,000 Lost Depreciation Tax Shield 5,000×(.25) = –$1,250 After-Tax Lease Payments 6,200×(1 –.25) = –$4,650 $25,000 –$5,900

  4. 5 $ 5 , 900 å = = Increased debt capacity $ 25 , 543 . 91 t ( 1 . 05 ) = 1 t Appendix 21A: APV Approachto Leasing APV = All-Equity Value + Financing NPV • The NPV of the financing is the forgone interest tax shields on the debt that ClumZee movers didn’t go into when they leased instead of bought the truck. • ClumZee agreed to a lease payment of $5,900. • This payment would support a loan of $25,543.91

  5. $ 425 . 73 $ 348 . 69 $ 267 . 79 $ 182 . 84 $ 93 . 65 - = + + + + $ 1 , 135 . 30 2 3 4 5 ( 1 . 06667 ) ( 1 . 06667 ) ( 1 . 06667 ) ( 1 . 06667 ) ( 1 . 06667 ) = - = - APV $ 591 . 38 $ 1 , 135 . 30 $ 543 . 91 Appendix 21A: APV Approachto Leasing The lost interest tax shield associated with this additional debt capacity of $25,543.91 has a present value of $1,135.30

More Related