Weeks 13 and 14 (4/21-5/1):
Lease Financing and Course Conclusion

Yikes! We are at the bittersweet time in our course together. It is almost over. We’ll miss it so much, but we might also want to do something else with the rest of our lives.

In these last 1.7 weeks, we’ll cover another topic which, in addition to Financial Analysis and Planning, serves the function of integrating much of the material we have covered. That topic is Lease Financing. There is a lot of material on the structure of the lease and on the accounting treatment of leases, but the analytical focus will be on the lease-buy decision. The lease-buy decision is actually a financing decision. The analysis of the advisability of a lease typically follows a prior decision to acquire an asset (based on an investment decision analysis). In lease analyses we are comparing lease financing (which is a type of debt) to “regular” debt financing. Video 20 and Chapter 25 in BMA are the main materials. As you review the video, work through the lease example in the Excel file (financing uma 13.xlsx). Toward the end of video 20 is described the concept of adjusted present value. Pay close attention to this material as well, because it describes how in some very specific cases the results of an investment decision and a financing decision must be considered together. The deliverable for this two-week period is Exercise 4, which is an individual, i.e., not a team, exercise.

We’ll also use the time to review the course learning objectives, especially those for the second half of the course on financing. Although there is no final exam, I have reposted the learning objectives document in a folder named Course Review. We can use it as the basis of reviewing the course learning points.

Readings

Topic | | Reading | | Focus | | Video | | | Assignment | | | | | |