Free Essay on Leverage Lease

Cost of Asset $1,000,000 Lease Term 15 Residual value $200,000 Equity $200,000 Debt $800,000 15yr term

Interest 7.5% Tax rate 30% Your equipment lease payment will be $8,052.19.

Payment Summary

Event Amount Term Period

Lease $1,000,000.00 1 Lease Payment $8,052.19 180 Monthly

Lease Residual $200,000.00 1 Payment Schedule

Event Lease Payment Interest Principal Balance

Lease 1 $1,000,000.00 $0.00 $0.00 $1,000,000.00

Lease Payment 1 $8,052.19 $5,416.67 $2,635.52 $997,364.48

Lease Payment 2 $8,052.19 $5,402.39 $2,649.80 $994,714.68

Lease Payment 3 $8,052.19 $5,388.04 $2,664.15 $992,050.53

Lease Payment 4 $8,052.19 $5,373.61 $2,678.58 $989,371.95

Lease Payment 5 $8,052.19 $5,359.10 $2,693.09 $986,678.86

Lease Payment 6 $8,052.19 $5,344.51 $2,707.68 $983,971.18

Lease Payment 7 $8,052.19 $5,329.84 $2,722.35 $981,248.83

Lease Payment 8 $8,052.19 $5,315.10 $2,737.09 $978,511.74

Lease Payment 9 $8,052.19 $5,300.27 $2,751.92 $975,759.82

Lease Payment 10 $8,052.19 $5,285.37 $2,766.82 $972,993.00

Lease Payment 11 $8,052.19 $5,270.38 $2,781.81 $970,211.19

Lease Payment 12 $8,052.19 $5,255.31 $2,796.88 $967,414.31

Lease Payment 13 $8,052.19 $5,240.16 $2,812.03 $964,602.28

Lease Payment 14 $8,052.19 $5,224.93 $2,827.26 $961,775.02

Lease Payment 15 $8,052.19 $5,209.61 $2,842.58 $958,932.44

Lease Payment 16 $8,052.19 $5,194.22 $2,857.97 $956,074.47

Lease Payment 17 $8,052.19 $5,178.74 $2,873.45 $953,201.02

Lease Payment 18 $8,052.19 $5,163.17 $2,889.02 $950,312.00

Lease Payment 19 $8,052.19 $5,147.52 $2,904.67 $947,407.33

Lease Payment 20 $8,052.19 $5,131.79 $2,920.40 $944,486.93

Lease Payment 21 $8,052.19 $5,115.97 $2,936.22 $941,550.71

Lease Payment 22 $8,052.19 $5,100.07 $2,952.12 $938,598.59

Lease Payment 23 $8,052.19 $5,084.08 $2,968.11 $935,630.48

Lease Payment 24 $8,052.19 $5,068.00 $2,984.19 $932,646.29

Lease Payment 25 $8,052.19 $5,051.83 $3,000.36 $929,645.93

Lease Payment 26 $8,052.19 $5,035.58 $3,016.61 $926,629.32

Lease Payment 27 $8,052.19 $5,019.24 $3,032.95 $923,596.37

Lease Payment 28 $8,052.19 $5,002.81 $3,049.38 $920,546.99

Lease Payment 29 $8,052.19 $4,986.30 $3,065.89 $917,481.10

Lease Payment 30 $8,052.19 $4,969.69 $3,082.50 $914,398.60

Lease Payment 31 $8,052.19 $4,952.99 $3,099.20 $911,299.40

Lease Payment 32 $8,052.19 $4,936.21 $3,115.98 $908,183.42

Lease Payment 33 $8,052.19 $4,919.33 $3,132.86 $905,050.56

Lease Payment 34 $8,052.19 $4,902.36 $3,149.83 $901,900.73

Lease Payment 35 $8,052.19 $4,885.30 $3,166.89 $898,733.84

Lease Payment 36 $8,052.19 $4,868.14 $3,184.05 $895,549.79

Lease Payment 37 $8,052.19 $4,850.89 $3,201.30 $892,348.49

Lease Payment 38 $8,052.19 $4,833.55 $3,218.64 $889,129.85

Lease Payment 39 $8,052.19 $4,816.12 $3,236.07 $885,893.78

Lease Payment 40 $8,052.19 $4,798.59 $3,253.60 $882,640.18

Lease Payment 41 $8,052.19 $4,780.97 $3,271.22 $879,368.96

Lease Payment 42 $8,052.19 $4,763.25 $3,288.94 $876,080.02

Lease Payment 43 $8,052.19 $4,745.43 $3,306.76 $872,773.26

Lease Payment 44 $8,052.19 $4,727.52 $3,324.67 $869,448.59

Lease Payment 45 $8,052.19 $4,709.51 $3,342.68 $866,105.91

Lease Payment 46 $8,052.19 $4,691.41 $3,360.78 $862,745.13

Lease Payment 47 $8,052.19 $4,673.20 $3,378.99 $859,366.14

Lease Payment 48 $8,052.19 $4,654.90 $3,397.29 $855,968.85

Lease Payment 49 $8,052.19 $4,636.50 $3,415.69 $852,553.16

Lease Payment 50 $8,052.19 $4,618.00 $3,434.19 $849,118.97

Lease Payment 51 $8,052.19 $4,599.39 $3,452.80 $845,666.17

Lease Payment 52 $8,052.19 $4,580.69 $3,471.50 $842,194.67

Lease Payment 53 $8,052.19 $4,561.89 $3,490.30 $838,704.37

Lease Payment 54 $8,052.19 $4,542.98 $3,509.21 $835,195.16

Lease Payment 55 $8,052.19 $4,523.97 $3,528.22 $831,666.94

Lease Payment 56 $8,052.19 $4,504.86 $3,547.33 $828,119.61

Lease Payment 57 $8,052.19 $4,485.65 $3,566.54 $824,553.07

Lease Payment 58 $8,052.19 $4,466.33 $3,585.86 $820,967.21

Lease Payment 59 $8,052.19 $4,446.91 $3,605.28 $817,361.93

Lease Payment 60 $8,052.19 $4,427.38 $3,624.81 $813,737.12

Lease Payment 61 $8,052.19 $4,407.74 $3,644.45 $810,092.67

Lease Payment 62 $8,052.19 $4,388.00 $3,664.19 $806,428.48

Lease Payment 63 $8,052.19 $4,368.15 $3,684.04 $802,744.44

Lease Payment 64 $8,052.19 $4,348.20 $3,703.99 $799,040.45

Lease Payment 65 $8,052.19 $4,328.14 $3,724.05 $795,316.40

Lease Payment 66 $8,052.19 $4,307.96 $3,744.23 $791,572.17

Lease Payment 67 $8,052.19 $4,287.68 $3,764.51 $787,807.66

Lease Payment 68 $8,052.19 $4,267.29 $3,784.90 $784,022.76

Lease Payment 69 $8,052.19 $4,246.79 $3,805.40 $780,217.36

Lease Payment 70 $8,052.19 $4,226.18 $3,826.01 $776,391.35

Lease Payment 71 $8,052.19 $4,205.45 $3,846.74 $772,544.61

Lease Payment 72 $8,052.19 $4,184.62 $3,867.57 $768,677.04

Lease Payment 73 $8,052.19 $4,163.67 $3,888.52 $764,788.52

Lease Payment 74 $8,052.19 $4,142.60 $3,909.59 $760,878.93

Lease Payment 75 $8,052.19 $4,121.43 $3,930.76 $756,948.17

Lease Payment 76 $8,052.19 $4,100.14 $3,952.05 $752,996.12

Lease Payment 77 $8,052.19 $4,078.73 $3,973.46 $749,022.66

Lease Payment 78 $8,052.19 $4,057.21 $3,994.98 $745,027.68

Lease Payment 79 $8,052.19 $4,035.57 $4,016.62 $741,011.06

Lease Payment 80 $8,052.19 $4,013.81 $4,038.38 $736,972.68

Lease Payment 81 $8,052.19 $3,991.94 $4,060.25 $732,912.43

Lease Payment 82 $8,052.19 $3,969.94 $4,082.25 $728,830.18

Lease Payment 83 $8,052.19 $3,947.83 $4,104.36 $724,725.82

Lease Payment 84 $8,052.19 $3,925.60 $4,126.59 $720,599.23

Lease Payment 85 $8,052.19 $3,903.25 $4,148.94 $716,450.29

Lease Payment 86 $8,052.19 $3,880.77 $4,171.42 $712,278.87

Lease Payment 87 $8,052.19 $3,858.18 $4,194.01 $708,084.86

Lease Payment 88 $8,052.19 $3,835.46 $4,216.73 $703,868.13

Lease Payment 89 $8,052.19 $3,812.62 $4,239.57 $699,628.56

Lease Payment 90 $8,052.19 $3,789.65 $4,262.54 $695,366.02

Lease Payment 91 $8,052.19 $3,766.57 $4,285.62 $691,080.40

Lease Payment 92 $8,052.19 $3,743.35 $4,308.84 $686,771.56

Lease Payment 93 $8,052.19 $3,720.01 $4,332.18 $682,439.38

Lease Payment 94 $8,052.19 $3,696.55 $4,355.64 $678,083.74

Lease Payment 95 $8,052.19 $3,672.95 $4,379.24 $673,704.50

Lease Payment 96 $8,052.19 $3,649.23 $4,402.96 $669,301.54

Lease Payment 97 $8,052.19 $3,625.38 $4,426.81 $664,874.73

Lease Payment 98 $8,052.19 $3,601.40 $4,450.79 $660,423.94

Lease Payment 99 $8,052.19 $3,577.30 $4,474.89 $655,949.05

Lease Payment 100 $8,052.19 $3,553.06 $4,499.13 $651,449.92

Lease Payment 101 $8,052.19 $3,528.69 $4,523.50 $646,926.42

Lease Payment 102 $8,052.19 $3,504.18 $4,548.01 $642,378.41

Lease Payment 103 $8,052.19 $3,479.55 $4,572.64 $637,805.77

Lease Payment 104 $8,052.19 $3,454.78 $4,597.41 $633,208.36

Lease Payment 105 $8,052.19 $3,429.88 $4,622.31 $628,586.05

Lease Payment 106 $8,052.19 $3,404.84 $4,647.35 $623,938.70

Lease Payment 107 $8,052.19 $3,379.67 $4,672.52 $619,266.18

Lease Payment 108 $8,052.19 $3,354.36 $4,697.83 $614,568.35

Lease Payment 109 $8,052.19 $3,328.91 $4,723.28 $609,845.07

Lease Payment 110 $8,052.19 $3,303.33 $4,748.86 $605,096.21

Lease Payment 111 $8,052.19 $3,277.60 $4,774.59 $600,321.62

Lease Payment 112 $8,052.19 $3,251.74 $4,800.45 $595,521.17

Lease Payment 113 $8,052.19 $3,225.74 $4,826.45 $590,694.72

Lease Payment 114 $8,052.19 $3,199.60 $4,852.59 $585,842.13

Lease Payment 115 $8,052.19 $3,173.31 $4,878.88 $580,963.25

Lease Payment 116 $8,052.19 $3,146.88 $4,905.31 $576,057.94

Lease Payment 117 $8,052.19 $3,120.31 $4,931.88 $571,126.06

Lease Payment 118 $8,052.19 $3,093.60 $4,958.59 $566,167.47

Lease Payment 119 $8,052.19 $3,066.74 $4,985.45 $561,182.02

Lease Payment 120 $8,052.19 $3,039.74 $5,012.45 $556,169.57

Lease Payment 121 $8,052.19 $3,012.59 $5,039.60 $551,129.97

Lease Payment 122 $8,052.19 $2,985.29 $5,066.90 $546,063.07

Lease Payment 123 $8,052.19 $2,957.84 $5,094.35 $540,968.72

Lease Payment 124 $8,052.19 $2,930.25 $5,121.94 $535,846.78

Lease Payment 125 $8,052.19 $2,902.50 $5,149.69 $530,697.09

Lease Payment 126 $8,052.19 $2,874.61 $5,177.58 $525,519.51

Lease Payment 127 $8,052.19 $2,846.56 $5,205.63 $520,313.88

Lease Payment 128 $8,052.19 $2,818.37 $5,233.82 $515,080.06

Lease Payment 129 $8,052.19 $2,790.02 $5,262.17 $509,817.89

Lease Payment 130 $8,052.19 $2,761.51 $5,290.68 $504,527.21

Lease Payment 131 $8,052.19 $2,732.86 $5,319.33 $499,207.88

Lease Payment 132 $8,052.19 $2,704.04 $5,348.15 $493,859.73

Lease Payment 133 $8,052.19 $2,675.07 $5,377.12 $488,482.61

Lease Payment 134 $8,052.19 $2,645.95 $5,406.24 $483,076.37

Lease Payment 135 $8,052.19 $2,616.66 $5,435.53 $477,640.84

Lease Payment 136 $8,052.19 $2,587.22 $5,464.97 $472,175.87

Lease Payment 137 $8,052.19 $2,557.62 $5,494.57 $466,681.30

Lease Payment 138 $8,052.19 $2,527.86 $5,524.33 $461,156.97

Lease Payment 139 $8,052.19 $2,497.93 $5,554.26 $455,602.71

Lease Payment 140 $8,052.19 $2,467.85 $5,584.34 $450,018.37

Lease Payment 141 $8,052.19 $2,437.60 $5,614.59 $444,403.78

Lease Payment 142 $8,052.19 $2,407.19 $5,645.00 $438,758.78

Lease Payment 143 $8,052.19 $2,376.61 $5,675.58 $433,083.20

Lease Payment 144 $8,052.19 $2,345.87 $5,706.32 $427,376.88

Lease Payment 145 $8,052.19 $2,314.96 $5,737.23 $421,639.65

Lease Payment 146 $8,052.19 $2,283.88 $5,768.31 $415,871.34

Lease Payment 147 $8,052.19 $2,252.64 $5,799.55 $410,071.79

Lease Payment 148 $8,052.19 $2,221.22 $5,830.97 $404,240.82

Lease Payment 149 $8,052.19 $2,189.64 $5,862.55 $398,378.27

Lease Payment 150 $8,052.19 $2,157.88 $5,894.31 $392,483.96

Lease Payment 151 $8,052.19 $2,125.95 $5,926.24 $386,557.72

Lease Payment 152 $8,052.19 $2,093.85 $5,958.34 $380,599.38

Lease Payment 153 $8,052.19 $2,061.58 $5,990.61 $374,608.77

Lease Payment 154 $8,052.19 $2,029.13 $6,023.06 $368,585.71

Lease Payment 155 $8,052.19 $1,996.51 $6,055.68 $362,530.03

Lease Payment 156 $8,052.19 $1,963.70 $6,088.49 $356,441.54

Lease Payment 157 $8,052.19 $1,930.73 $6,121.46 $350,320.08

Lease Payment 158 $8,052.19 $1,897.57 $6,154.62 $344,165.46

Lease Payment 159 $8,052.19 $1,864.23 $6,187.96 $337,977.50

Lease Payment 160 $8,052.19 $1,830.71 $6,221.48 $331,756.02

Lease Payment 161 $8,052.19 $1,797.01 $6,255.18 $325,500.84

Lease Payment 162 $8,052.19 $1,763.13 $6,289.06 $319,211.78

Lease Payment 163 $8,052.19 $1,729.06 $6,323.13 $312,888.65

Lease Payment 164 $8,052.19 $1,694.81 $6,357.38 $306,531.27

Lease Payment 165 $8,052.19 $1,660.38 $6,391.81 $300,139.46

Lease Payment 166 $8,052.19 $1,625.76 $6,426.43 $293,713.03

Lease Payment 167 $8,052.19 $1,590.95 $6,461.24 $287,251.79

Lease Payment 168 $8,052.19 $1,555.95 $6,496.24 $280,755.55

Lease Payment 169 $8,052.19 $1,520.76 $6,531.43 $274,224.12

Lease Payment 170 $8,052.19 $1,485.38 $6,566.81 $267,657.31

Lease Payment 171 $8,052.19 $1,449.81 $6,602.38 $261,054.93

Lease Payment 172 $8,052.19 $1,414.05 $6,638.14 $254,416.79

Lease Payment 173 $8,052.19 $1,378.09 $6,674.10 $247,742.69

Lease Payment 174 $8,052.19 $1,341.94 $6,710.25 $241,032.44

Lease Payment 175 $8,052.19 $1,305.59 $6,746.60 $234,285.84

Lease Payment 176 $8,052.19 $1,269.05 $6,783.14 $227,502.70

Lease Payment 177 $8,052.19 $1,232.31 $6,819.88 $220,682.82

Lease Payment 178 $8,052.19 $1,195.37 $6,856.82 $213,826.00

Lease Payment 179 $8,052.19 $1,158.22 $6,893.97 $206,932.03

Lease Payment 180 $8,052.19 $1,120.88 $6,931.31 $200,000.72

Lease Residual 1 $200,000.00 $0.00 $200,000.00 $0.72

Grand Total $1,000,000.00 $1,649,394.20 $649,394.92 $999,999.28 $0.72

Question 2

Would the deal make sense for DEF Leasing, assuming that its shareholders insiston a required return on equity of 15% p.a.?

In my opinion, companies with an ROE below 10% should always pay all its earnings back to shareholders as dividends. As weve seen above, a companys sustainable growth rate is equal to its ROE or lower. If the company can o...