|
Introduction |
vii |
|
Chapter 1: The Rules of Engagement |
1 |
|
Absolute Obligations |
1 |
|
Residual Values |
3 |
|
Chapter 2: Lease Commencement |
6 |
|
Look Before You Lease |
6 |
|
Delivery and Acceptance |
7 |
|
Interim Rent |
9 |
|
Payment to Equipment Manufacturer |
10 |
|
Chapter 3: Vendor and Licensor Issues |
12 |
|
Assignment of Warranties |
12 |
|
Lessee Rights Upon Equipment Failure |
13 |
|
Coordinating Hardware and Software Contracts |
14 |
|
Chapter 4: Use, Maintenance and Return Issues |
16 |
|
Right to Relocate Equipment |
16 |
|
Return of Equipment |
17 |
|
Equipment Substitution |
18 |
|
Reasonable Wear and Tear |
19 |
|
Chapter 5: Modifications and Upgrades |
20 |
|
Equipment Modifications |
20 |
|
Upgrades |
21 |
|
Chapter 6: Taxes |
25 |
|
Sales and Use Taxes |
25 |
|
Property Taxes |
26 |
|
Income Taxes |
27 |
|
Chapter 7: Casualties |
30 |
|
Insurance |
30 |
|
Lessee Obligations |
31 |
|
Casualty Values |
32 |
|
Casualty Values—Reasonableness Tests |
34 |
|
Chapter 8: Lessee Flexibility Options |
37 |
|
Early Termination |
37 |
|
Early Buyout |
40 |
|
Subleasing |
42 |
|
Lessor Perspectives |
43 |
|
Chapter 9: Other Lease Language Issues |
44 |
|
Lessor Assignments |
44 |
|
Lessee Defaults and Remedies |
47 |
|
Common Default Issues |
48 |
|
Lessor Defaults and Remedies |
51 |
|
Indemnities and Liens |
52 |
|
Chapter 10: The Rogue's Gallery of Gotcha's |
56 |
|
Automatic Renewal |
56 |
|
Interim Rent |
57 |
|
Deemed Acceptance |
57 |
|
Perfect Returns |
58 |
|
Casualty Value Calculations |
58 |
|
In Default |
59 |
|
Vendor Issues |
59 |
|
Contest Rights |
59 |
|
Blanket Tax Indemnities |
60 |
|
Chapter 11: Lease Negotiations |
61 |
|
An Example Lease for Analysis |
61 |
|
1. Lease |
61 |
|
2. Schedules |
62 |
|
3. Term |
62 |
|
4. Title and Ownership |
63 |
|
5. Rent Payment Obligations |
64 |
|
6. Taxes |
66 |
|
7. Maintenance and Alterations |
67 |
|
8. Use and Location |
67 |
|
9. Return |
67 |
|
10. Limitation of Warranty and Liability |
68 |
|
11. Assignment |
68 |
|
12. Additional Assurances |
69 |
|
13. Lessor's Performance of Lessee's Obligations |
69 |
|
14. Reports |
70 |
|
15. Indemnity |
70 |
|
16. Risk of Loss |
70 |
|
17. Insurance |
71 |
|
18. Default |
71 |
|
19. Remedies |
73 |
|
20. Miscellaneous |
76 |
|
Purchase Option Rider |
77 |
|
Analysis of Our Example Lease |
79 |
|
Summary |
120 |
|
Chapter 12: Leasing and the Time Value of Money |
121 |
|
Present Values |
122 |
|
Yields |
126 |
|
Payments in Advance and Arrears |
129 |
|
Future Values |
131 |
|
Payment Frequency: Quarterly vs. Monthly |
135 |
|
Step Payments |
138 |
|
Summary |
141 |
|
Chapter 13: Lease Versus Lease Analysis |
143 |
|
The First Law of Lease versus Lease Analysis |
144 |
|
Basic Lease Comparison Issues |
145 |
|
The Appropriate Discount Rate |
146 |
|
Lease Commencement |
148 |
|
End-of-Lease Issues |
148 |
|
Equipment Available for Shipment |
148 |
|
Shipping Expense |
149 |
|
De-Installation, Packaging and Certification |
149 |
|
Equipment Casualties |
149 |
|
A Note on Fixed Price Purchase Options |
150 |
|
Comparing Bids: A Comprehensive Example |
152 |
|
A Word on Financial Calculators and Spreadsheets |
153 |
|
Analysis of Base Case Bids |
153 |
|
Analysis of Early Out Bids |
164 |
|
Analysis of Purchase Bids |
171 |
|
Analysis of Renewal Bids |
178 |
|
Selecting the Lowest Cost Lessor—Scenario Analysis |
186 |
|
Lease Versus Lease Analysis Summary |
190 |
|
Chapter 14: Lease Versus Purchase Analysis |
191 |
|
Environmental Factors Influencing Lease or Buy |
192 |
|
Purchase Volume |
192 |
|
The Firm's Cost of Money |
193 |
|
Tax Issues |
197 |
|
Sales and Use Taxes |
200 |
|
Applicable Federal Rate |
200 |
|
Net Operating Loss Carryforwards |
201 |
|
Alternative Minimum Tax |
202 |
|
Foreign Tax Credits |
205 |
|
Policy Factors Influencing Lease or Buy |
208 |
|
Interim rent |
208 |
|
Equipment Utilization Period |
209 |
|
Shipping |
209 |
|
De-Installation, Packaging and Certification |
210 |
|
Equipment Casualties |
210 |
|
After End-of-Lease Damage |
211 |
|
Higher Ownership Cost Issues |
211 |
|
Basic Analytical Framework for Lease Versus Purchase Analysis |
212 |
|
Coterminus Time Horizons |
213 |
|
The Appropriate Discount Rate |
220 |
|
Value Added Costs, Cost Allocations and Incremental Costs |
220 |
|
Incremental Lease Costs |
222 |
|
Incremental Purchase Costs |
223 |
|
Base Case Analysis: Lease or Buy |
224 |
|
A Note on Lease Versus Purchase Models |
224 |
|
Base Case Assumptions |
225 |
|
Base Case Cost of Leasing |
226 |
|
Base Case Cost of Purchasing |
231 |
|
An Important Note on The Cost of Leasing and Lease Rates |
239 |
|
Intangible Issues |
243 |
|
Intangibles Favoring Leasing |
243 |
|
Intangibles Favoring Ownerhship |
244 |
|
Lease Versus Purchase Analysis Summary |
244 |
|
Chapter 15: Lease Versus Purchase Sensitivity |
246 |
|
New Base Case for Analysis Purposes |
246 |
|
Environmental Factors Influencing Lease or Buy |
248 |
|
Cost of Money Sensitivity |
248 |
|
Sales and Use Tax Sensitivity |
249 |
|
Federal and State Income Tax Rate Sensitivity |
251 |
|
Net Operating Loss Carryforward Sensitivity |
252 |
|
Alternative Minimum Tax Sensitivity |
253 |
|
Foreign Tax Credit Sensitivity |
255 |
|
Residual Value Sensitivity |
257 |
|
Policy Factors Influencing Lease or Buy |
259 |
|
End-of-Lease Cost Sensitivity |
259 |
|
Ownership Portfolio Cost Sensitivity |
261 |
|
Comprehensive Example |
264 |
|
Summary |
266 |
|
Subject Index |
267 |