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Case Study Leasing - Robertus Adi Nugroho

1. Warf Computers is deciding whether to buy or lease specialized equipment needed to produce microphones for their virtual keyboard. 2. Buying the equipment would cost $5 million with a salvage value of $600,000 after 4 years. Leasing the equipment would be 4 annual payments of $1.3 million plus a $300,000 security deposit returned at the end. 3. After calculating the cash flows of both options considering tax benefits, the net advantage to leasing is positive. Therefore, Warf Computers should lease the equipment rather than buy.

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223 views2 pages

Case Study Leasing - Robertus Adi Nugroho

1. Warf Computers is deciding whether to buy or lease specialized equipment needed to produce microphones for their virtual keyboard. 2. Buying the equipment would cost $5 million with a salvage value of $600,000 after 4 years. Leasing the equipment would be 4 annual payments of $1.3 million plus a $300,000 security deposit returned at the end. 3. After calculating the cash flows of both options considering tax benefits, the net advantage to leasing is positive. Therefore, Warf Computers should lease the equipment rather than buy.

Uploaded by

Robertus Adi Nugroho
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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CASE STUDY

LEASING

Warf Computers has decided to proceed with the manufacture and distribution of the
virtual keyboard (VK) the company has developed. To undertake this venture, the company
needs to obtain equipment for the production of the microphone for the keyboard.Because of
the required sensitivity of the microphone and its small size, the company needs specialized
equipment for production.
Nick Warf, the company president, has found a vendor for the equipment. Clapton
Acoustical Equipment has offered to sell Warf Computers the necessary equipment at a price
of $5 million. The depreciation method that applied to these equipment is straight line method
for four years. At the end of four years, the market value of the equipment is expected to be
$600,000.
Alternatively, the company can lease the equipment from Hendrix leasing. The lease
contract calls for four annual payment of $1.3 million due at the beginning of the year.
Additionally, Warf Computers must make a security deposit of $300,000 that will returned
when the lease expires. Warf computers can issue bonds with a yield of 11%, and the company
has a marginal tax rate of 35%
Questions:
1. Should Warf buy or lease the equipment?
2. The lease contract can include a cancellation option. The cancellation option would
allow Warf Computersto cancel the lease on any anniversary date of the contract. To
cancel the lease, Warf Computers would be required to give 30 days’notice prior to the
anniversary date. How would the inclusion of a cancellation affect the value of the
lease?

-oOo-

1. Untuk memutuskan apakah Warf Computer harus membeli atau menyewa alat ini
kita dapat menghitungnya.

Year 0 Year 1 Year 2 Year 3 Year 4


Buy
Cost of Machine -5000000
Salvage value 390000
[600000*(1-0.35)]
Depreciation tax benefit 437500 437500 437500 437500
-5000000 437500 437500 437500 827500
Lease
Lease payment -1300000 -1300000 -1300000 -1300000
[600000*(1-0.35)]
Deposit -300000 300000
Tax benefit of lease 455000 455000 455000 455000
payment
(1300000*0.35)
-1145000 -845000 -845000 -845000 300000

LEASE-BUY
Year 0 Year 1 Year 2 Year 3 Year 4

Lease
Lease payment -1300000 -1300000 -1300000 -1300000
Deposit -300000 300000
Tax benefit of lease 455000 455000 455000 455000
payment
(1300000*0.35)
-Buy (semua dikalikan minus)
Cost of Machine 5000000
Salvage value -390000
[600000*(1-0.35)]
Depreciation tax benefit -437500 -437500 -437500 -437500

Total 3855000 -1282500 -1282500 -1282500 -527500

Dikatakan bahwa perusahaan memiliki issue bond dengan yield 11%


Maka aftertax cost of debtnya adalah= 0.11(1-0.35)=0.0715 atau 7.15%

Maka, Net advantage to leasing atau NAL adalah


1282500 1282500 1282500 527500
NAL = 3855000 - − − −
(1+0.0715)1 (1+0.0715)2 (1+0.0715)3 (1+0.0715)4
1282500 1282500 1282500 527500
NAL = 3855000 -
(1.0715) 1 − (1.0715) 2 − (1.0715) 3 − (1.0715)4
1282500 1282500 1282500 527500
NAL = 3855000 - − − −
1.0715 1.148 1.230 1.318

NAL = 3855000 – 1196920 – 1117160 – 1042682 – 400227


NAL = 98011

Karena NAL positif, maka Warf Computers disarankan untuk menyewa / lease peralatan
ini saja daripada membelinya
2. Opsi untuk membatalkan sewa menyewa ini adalah opsi yang menguntungkan bagi
Warf computer, karena jika ini masuk sebagai opsi Warf computer dapat
membatalkan transaksi ini kapanpun dirasa sesuai. Jadi, opsi pembatalan ini akan
meningkatkan value dari proses lease ini.
Nama : ROBERTUS ADI NUGROHO
NIK : 8112419017

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