財(cái)務(wù)管理英文課件：C13Term Loans and Leases

1、21.1 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. Pearson Education Limited 2009. Created by Gregory Kuhlemeyer. 21.2 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. Pearson Education Limited 2009. Created by Gregory Kuhlemeyer. 1.Describe

2、 various types of term loans and discuss the costs and benefits of each. 2.Discuss the nature and the content of loan agreements, including protective (restrictive) covenants. 3.Discuss the sources and types of equipment financing. 4.Understand and explain lease financing in its various forms. 5.Com

3、pare lease financing with debt financing via a numerical evaluation of the present value of cash outflows. 21.3 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. Pearson Education Limited 2009. Created by Gregory Kuhlemeyer. Term Loans Provisions of Loan Agreements Equipme

4、nt Financing Lease Financing Evaluating Lease Financing in Relation to Debt Financing 21.4 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. Pearson Education Limited 2009. Created by Gregory Kuhlemeyer. Debt originally scheduled for repayment in more than 1 year, but gene

5、rally in less than 10 years. Credit is extended under a formal loan arrangement. Usually payments that cover both interest and principal are made quarterly, semiannually, or annually. The repayment schedule is geared to the borrowers cash-flow ability and may be amortized or have a balloon payment.

6、21.5 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. Pearson Education Limited 2009. Created by Gregory Kuhlemeyer. The interest rate is higher than on a short- term loan to the same borrower (25 to 50 basis points on a low risk borrower). Interest rates are either (1) f

7、ixed or (2) variable depending on changing market conditions possibly with a floor or ceiling. Borrower is also required to pay legal expenses (loan agreement) and a commitment fee (25 to 75 basis points) may be imposed on the unused portion. 21.6 Van Horne and Wachowicz, Fundamentals of Financial M

8、anagement, 13th edition. Pearson Education Limited 2009. Created by Gregory Kuhlemeyer. The borrower can tailor a loan to their specific needs through direct negotiation with the lender. Flexibility in terms of changing needs allows the borrower to revise the loan more quickly and more easily. Term

9、loan financing is more readily available over time making it a more dependable source of financing than, say, the capital markets. 21.7 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. Pearson Education Limited 2009. Created by Gregory Kuhlemeyer. Agreements are frequentl

10、y for three years. The actual notes are usually 90 days, but the company can renew them per the agreement. Most useful when funding needs are uncertain. Many are set up so at maturity the borrower has the option of converting into a term loan. A formal, legal commitment to extend credit up to some m

11、aximum amount over a stated period of time. 21.8 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. Pearson Education Limited 2009. Created by Gregory Kuhlemeyer. These term loans usually have final maturities in excess of seven years. These companies do not have compensati

12、ng balances to generate additional revenue and usually have a prepayment penalty. Loans must yield a return commensurate with the risks and costs involved in making the loan. As such, the rate is typically higher than what a bank would charge, but the term is longer. 21.9 Van Horne and Wachowicz, Fu

13、ndamentals of Financial Management, 13th edition. Pearson Education Limited 2009. Created by Gregory Kuhlemeyer. Maturities range from 9 months to 30 years (or more). Shelf registration makes it practical for corporate issuers to offer small amounts of MTNs to the public. Issuers include finance com

14、panies, banks or bank holding companies, and industrial companies. A corporate or government debt instrument that is offered to investors on a continuous basis. An MTN issue sold internationally outside the country in whose currency the MTN is denominated. 21.10 Van Horne and Wachowicz, Fundamentals

15、 of Financial Management, 13th edition. Pearson Education Limited 2009. Created by Gregory Kuhlemeyer. A restriction on a borrower imposed by a lender; for example, the borrower must maintain a minimum amount of working capital. This allows the lender to act (or be “warned” early) when adverse devel

16、opments are occurring that will affect the borrowing firm. A legal agreement specifying the terms of a loan and the obligations of the borrower. 21.11 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. Pearson Education Limited 2009. Created by Gregory Kuhlemeyer. are used

17、in most loan agreements, which are usually variable to fit the situation. used in most loan agreements, which are usually variable. that are used according to the situation. * * Restrictions are negotiated between the borrower and lender 21.12 Van Horne and Wachowicz, Fundamentals of Financial Manag

18、ement, 13th edition. Pearson Education Limited 2009. Created by Gregory Kuhlemeyer. Working capital requirement Cash dividend and repurchase of common stock restriction Capital expenditures limitation Limitation on other indebtedness 21.13 Van Horne and Wachowicz, Fundamentals of Financial Managemen

19、t, 13th edition. Pearson Education Limited 2009. Created by Gregory Kuhlemeyer. Furnish financial statements and maintain adequate insurance to the lender Must not sell a significant portion of its assets and pay all liabilities as required Negative pledge clause Cannot sell or discount accounts rec

20、eivable Prohibited from entering into any leasing arrangement of property Restrictions on other contingent liabilities 21.14 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. Pearson Education Limited 2009. Created by Gregory Kuhlemeyer. Loans are usually extended for more

21、 than 1 year. The lender evaluates the marketability and quality of equipment to determine the loanable percentage. Repayment schedules are designed by the lender so that the market value is expected to exceed the loan balance by a given safety margin. Trucking equipment is highly marketable, and th

22、e lender may advance as much as 80% of market value, while a limited use lathe might provide only a 40% advance or a specific use item cannot be used as collateral. 21.15 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. Pearson Education Limited 2009. Created by Gregory K

23、uhlemeyer. A lien on specifically identified personal property (assets other than real estate) backing a loan. To perfect (make legally valid) the lien, the lender files a copy of the security agreement or a financing statement with a public office of the state in which the equipment is located. 21.

24、16 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. Pearson Education Limited 2009. Created by Gregory Kuhlemeyer. The buyer signs a conditional sales contract security agreement to make installment payments (usually monthly or quarterly) over time. The seller has the aut

25、hority to repossess the equipment if the buyer does not meet all of the terms of the contract. The seller can sell the contract without the buyers consent usually to a finance company or bank. A means of financing provided by the seller of equipment, who holds title to it until the financing is paid

26、 off. 21.17 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. Pearson Education Limited 2009. Created by Gregory Kuhlemeyer. ApartmentsHouses OfficesAutomobiles A contract under which one party, the lessor (owner) of an asset, agrees to grant the use of that asset to anoth

27、er, the lessee, in exchange for periodic rental payments. 21.18 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. Pearson Education Limited 2009. Created by Gregory Kuhlemeyer. : Use of an asset without purchasing the asset : Make periodic lease payments Contract specifies

28、 who maintains the asset lessor pays maintenance lessee pays maintenance costs Operating lease (short-term, cancellable) vs. financial lease (longer-term, noncancelable) Options at expiration to lessee 21.19 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. Pearson Educati

29、on Limited 2009. Created by Gregory Kuhlemeyer. The lessor realizes any residual value. There may be a tax advantage as land is not depreciable, but the entire lease payment is a deductible expense. : insurance companies, institutional investors, finance companies, and independent companies. The sal

30、e of an asset with the agreement to immediately lease it back for an extended period of time. 21.20 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. Pearson Education Limited 2009. Created by Gregory Kuhlemeyer. The firm often leases an asset directly from a manufacturer

31、(e.g., IBM leases computers and Xerox leases copiers). : manufacturers, finance companies, banks, independent leasing companies, special-purpose leasing companies, and partnerships. Under a firm acquires the use of an asset it did not previously own. 21.21 Van Horne and Wachowicz, Fundamentals of Fi

32、nancial Management, 13th edition. Pearson Education Limited 2009. Created by Gregory Kuhlemeyer. Popular for big-ticket assets such as aircraft, oil rigs, and railway equipment. The role of the lessor changes as the lessor is borrowing funds itself to finance the lease for the lessee (). Any belongs

33、 to the lessor as well as any net cash inflows during the lease. A lease arrangement in which the lessor provides an equity portion (usually 20 to 40 percent) of the leased assets cost and third-party lenders provide the balance of the financing. 21.22 Van Horne and Wachowicz, Fundamentals of Financ

34、ial Management, 13th edition. Pearson Education Limited 2009. Created by Gregory Kuhlemeyer. In the past, leases were “off-balance-sheet” items and hid the true obligations of some firms. The lessee can deduct the full lease payment in a properly structured lease. To be a “true lease” the IRS requir

35、es: 1.Lessor must have a minimum “at-risk” (inception and throughout lease) of 20% or more of the acquisition cost. 2.The remaining life of the asset at the end of the lease period must be the longer of 1 year or 20% of original estimated asset life. 3.An expected profit to the lessor from the lease

36、 contract apart from any tax benefits. 21.23 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. Pearson Education Limited 2009. Created by Gregory Kuhlemeyer. Leasing allows higher-income taxable companies to own equipment (lessor) and take accelerated depreciation, while a

37、 marginally profitable company (lessee) would prefer the advantages afforded by leases. Thus, leases provide a means of shifting tax benefits to companies that can fully utilize those benefits. : economies of scale in the purchase of assets; different estimates of asset life, salvage value, or the o

38、pportunity cost of funds; and the lessors expertise in equipment selection and maintenance. 21.24 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. Pearson Education Limited 2009. Created by Gregory Kuhlemeyer. Basket Wonders (BW) is deciding between leasing a new machine

39、or purchasing the machine outright. The equipment, which manufactures Easter baskets, costs $74,000 and can be leased over seven years with payments being made at the beginning of each year. 21.25 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. Pearson Education Limited

40、2009. Created by Gregory Kuhlemeyer. The lessor calculates the lease payments based on an expected return of 11% over the seven years. (Ignore possible residual value of equipment to lessor.) The lease is a . The firm is in the 40% marginal tax bracket. If bought, the equipment is expected to have a

41、 final salvage value of $7,500. 21.26 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. Pearson Education Limited 2009. Created by Gregory Kuhlemeyer. The purchase of the equipment will result in a depreciation schedule of for the first six years (5-year property class) ba

42、sed on a $74,000 depreciable base. Loan payments are based on a 12% loan with payments occurring at the beginning of each period. 21.27 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. Pearson Education Limited 2009. Created by Gregory Kuhlemeyer. The lessor will charge ,

43、 beginning today, for seven years until expiration of the lease contract. 0 1 2 3 4 5 6 This is an annuity due that equals today. = (PVIFA , 7) (1. ) $66,666.67 = (4.712) = 21.28 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. Pearson Education Limited 2009. Created by G

44、regory Kuhlemeyer. Net cash outflows at t = 0: $ 14,148.27 Net cash outflows at t = 1 to 6: $ 8,488.96 Net cash outflows at t = 7: $ 5,659.31 0 1 2 3 4 5 6 7 = Tax-shield benefit (Inflow) = = Lease payment (Outflow) = 21.29 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition.

45、 Pearson Education Limited 2009. Created by Gregory Kuhlemeyer. Since the lease payments are prepaid, the company is not able to deduct the expenses until the end of each year. The lessee, , can deduct the entire as an expense each year. Thus, the net cash outflows are given as the difference betwee

46、n lease payments (outflow) and tax-shield benefits (inflow). The difference in risk between the lease and the purchase (using debt) is negligible and the appropriate before-tax cost is the same as debt, 12%. : 21.30 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. Pearson

47、 Education Limited 2009. Created by Gregory Kuhlemeyer. The after-tax cost of financing the lease should be equivalent to the after-tax cost of debt financing. After-tax cost = 12% ( 1 0.4 ) = . The present value of cash outflows: $14,148.27 x (PVIF 7.2%, 0) = $ 8,488.96 x (PVIFA 7.2%, 6) = $ -5,659

48、.31 x (PVIF 7.2%, 7) = 21.31 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. Pearson Education Limited 2009. Created by Gregory Kuhlemeyer. will make loan payments of , beginning today, for seven years until full payment of the loan. 0 1 2 3 4 5 6 This is an annuity due

49、that equals today. = (PVIFA , 7) (1. ) $66,071.43 = (4.564) = 21.32 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. Pearson Education Limited 2009. Created by Gregory Kuhlemeyer. * 0$14,477.42 $59,522.58 - 1 14,477.42 52,187.87$7,142.71 2 14,477.42 43,972.99 6,262.54 3 14,477.42 34,772.33 5,276.76 4 14,477.42 24,467.59 4,172.68 5 14,477.42 12,926.28 2,936.11 6 14,477.43