Types of lease contracts
What are the types of lease contracts which are seen in practice?
Expert
Many types of lease contracts are seen in practice, some of popular ones are as follows:
Financial Lease: This type of lease contract extends over the whole useful life of an asset and it cannot be cancelled before the lease period expires. The legal ownership of the asset is although not transferred. In these types of lease the duration of the lease contract is almost equal to the useful life of the asset. Thus the whole investment is recovered by the lesser. In a Finance Lease the lessee may be given an option to purchase the asset at the expiration of the Lease period. In financial lease, the maintenance and other related expenses are normally borne by the lessee as well as the risk of obsolescence. The asset given on lease to lessee is of specialised nature and can only be used by the lessee without major modification.
Operating Lease: This type of lease is such in which the asset is leased for a short period. In an operating lease the contract is cancellable during the term of lease. The period of lease in such types of leases is shorter than the asset’s economic life. In other words, an operating lease is not a Finance Lease. In this type of lease a single lease covers a period which is shorter than the useful life of the asset and therefore the original cost of the asset cannot be recovered in a single lease. Here the risk of obsolescence remains with the lesser and he is also responsible for the insurance and other expenses. Since the period of the lease is shorter therefore the lease rentals will be greater. Such types of leases are preferred when the asset is likely to become obsolete within a short period.
The suitable lease option would be financing lease for Paulo’s restaurant since Paulo would be using the assets for a rather long period and also the assets are not prone to become obsolete within a short period.
How could we acquire an indisputable discount rate?
PV of dividends: Cortez, Inc., is expecting to pay out a dividend of $2.50 next year. After that it expects its dividend to grow at 7 percent for the next four years. What is the present value of dividends over the next five-year period if the required rate of return is 10 percent?
Explain the way of estimating an average.
Explain lognormal random walk based on Brownian motion.
Active vs. Passive fund managers: Passive fund managers adopt a long term buy and hold strategy. Usually, stocks are purchased so that the portfolio’s returns will track those of an
Exploitation of favorable market conditions: The firms after estimating WCR are in a position to clearly identify their status of excess current assets. After this realization they can use this knowledge to encash conditions arising in market even for
Crawford Corporation is planning to lease a machine for the next 4 years for an annual lease payment of $3,000 paid in advance, plus a non-refundable initial fee of $3,000. There is a 1-year delay for the tax benefits of leasing. Crawford may buy the machine, deprecia
Task Description Length: 1000-2000 words (up to 500 words above 2000 permitted) Description: • Complete this assignment in groups of 4-5 students. • Maintain a portfolio of financial issues taken from 8 news sources. • Analyse the articles with reference to theory covered in class and highlig
Who proposed a modern quantitative methodology for portfolio selection?
18,76,764
1937720 Asked
3,689
Active Tutors
1446354
Questions Answered
Start Excelling in your courses, Ask an Expert and get answers for your homework and assignments!!