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    Leveraged Leasing Hardware Leasing Company Data:: PV of Net Lease Receipts $88,606

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    debojyoti
    This document summarizes a leveraged leasing transaction for equipment valued at $1,000,000 with a 15 year life and $200,000 residual value. It shows that with 80% leverage through a 15 year $800,000 loan at 7.5% and a 15 year lease at 6.5%, the transaction generates a positive net present value of $120,901. This is achieved through monthly lease payments of $8,052, loan payments of $6,812, and a tax shield worth $232,295 over the first 3.5 years.

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    Leveraged Leasing Hardware Leasing Company Data:: PV of Net Lease Receipts $88,606

    Uploaded by

    debojyoti
    34 views2 pages
    This document summarizes a leveraged leasing transaction for equipment valued at $1,000,000 with a 15 year life and $200,000 residual value. It shows that with 80% leverage through a 15 year $800,000 loan at 7.5% and a 15 year lease at 6.5%, the transaction generates a positive net present value of $120,901. This is achieved through monthly lease payments of $8,052, loan payments of $6,812, and a tax shield worth $232,295 over the first 3.5 years.

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    Lease_example

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    This document summarizes a leveraged leasing transaction for equipment valued at $1,000,000 with a 15 year life and $200,000 residual value. It shows that with 80% leverage through a 15 year $800,000 loan at 7.5% and a 15 year lease at 6.5%, the transaction generates a positive net present value of $120,901. This is achieved through monthly lease payments of $8,052, loan payments of $6,812, and a tax shield worth $232,295 over the first 3.5 years.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    34 views2 pages

    Leveraged Leasing Hardware Leasing Company Data:: PV of Net Lease Receipts $88,606

    Uploaded by

    debojyoti
    This document summarizes a leveraged leasing transaction for equipment valued at $1,000,000 with a 15 year life and $200,000 residual value. It shows that with 80% leverage through a 15 year $800,000 loan at 7.5% and a 15 year lease at 6.5%, the transaction generates a positive net present value of $120,901. This is achieved through monthly lease payments of $8,052, loan payments of $6,812, and a tax shield worth $232,295 over the first 3.5 years.

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    Structured Finance

    Leveraged leasing

    Hardware Leasing Company

    Data:
    Value of equipment $ 1,000,000
    Asset life 15 years
    Residual value $ 200,000
    Tax life 7 years
    Leasing company's tax rate 30%
    Leasing company's required IRR 15%

    Lease
    Tenor of lease 15 years
    Frequency 12
    Rate on lease 6.5%
    Monthly lease payments $8,052

    Leveraged financing
    Amount of debt $ 800,000
    Tenor of debt 15
    Rate on debt 7.50%
    Terminal payment $ 200,000
    Frequency 12
    Monthly loan payments $6,812

    Total PV to Hardware Leasing


    Initial equity investment $ 200,000
    Required return 15%
    Monthly net lease receipts $1,240
    Period of net lease receipts 15 years
    PV of net lease receipts $88,606
    Residual value $ 200,000
    Date of residual value 15 years
    PV of residual value $ 21,376
    Final payment to bank $ 200,000
    Date of final payment 15 years
    PV of final payment to bank $ (21,376)
    Monthly tax shield (using DDB) $ 7,143
    Period of tax savings 3.5 years
    PV of tax savings $232,295

    Total Net Present Value $120,901

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