The BCO315 Corporate Finance assignment entails Benefits of leasing versus ownership of assets. So, analyze the concepts underlying the firm’s cost of capital.

BCO315 Corporate Finance : Benefits of leasing versus ownership of assets

Corporate Finance       Task brief & rubrics

Task: Final Assignment (60% of course grade)

You are asked to answer all the questions in the proposed four cases.

This task assesses the following learning outcomes:

  • Discuss and analyze the benefits of leasing versus ownership of assets. Also, analyze the concepts underlying the firm’s cost of capital.Demonstrate a deep understanding of the theory and practices of mergers and acquisitions.
  • Critically evaluate financial distress.

LAUNCH: WEEK 5 / DELIVERY: WEEK 8 Sunday July 19th, 2020, 23:59hrs ON MOODLE

Submission file format: Word document with all the answers, clearly identifying each case separately.

 CASE 1 (20 points)

BCO315 Corporate Finance : Benefits of leasing versus ownership of assets

You work for a nuclear research laboratory that is contemplating leasing a diagnostic scanner (leasing is a very common practice with expensive, high-tech equipment).  Every decision made in a business has financial implications, and any decision that involves the use of money is a corporate financial decision. Defined broadly, everything that a business does fits under the rubric of corporate finance. The scanner costs €4,800,000, and it would be depreciated straight-line to zero over four years. Because of radiation contamination, it actually will be completely valueless in four years. So, you can lease it for €1,430,000 per year for four years. You can borrow at 8 percent before taxes. Assume that the tax rate is 21 percent.

Instructions:

Firstly, Create a lease-versus-buy analysis. Calculate the NPV of leasing. Should you lease or buy? (10 points)

Secondly, What are the differences between an operating lease and a financial lease? (10 points)

Detailed Instructions

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