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/Finance490-EOP-EquipmentFinance&Leasing-Spring,2010Financingcommercialaircraft,machinetools,computerequipment,trucksorevensoftware?Wanttogetthisaccomplishedinthecurrentchallengingcapitalmarketenvironment?ThiscoursewillprovidethefutureCFOlDecision-MakeracompetitivebasistoanalyzeaUissues,decisionmakingtechniques,industrybackground,accountingandeconomicfactorsaswellaslessor-lesseenegotiatingtechniquesregardingequipmentleasingandfinance.Basicaccounting,presentvalue,capitalbudgetingandeconomicunderstandingrequired.THINKLIKEACFO.CoursewillemphasizeaProfessionalSeminartypeunderstandingofequipmentissuestobeconsideredinfmancedecisions.Lease-Financestructuring,pricing,residualvalues,debtrate,accountingissues,equipmentvalues,equipmentmaintenanceandmarketeconomicswillbepartofpresentation.Empbasiswillbeplacedonunderstandingnegotiableitemsinrelationtomarketconditions,lenderllessorappetites,creditstandardsandcorporateobjectives.StudentsareexpectedtobeginthinkinglikeaCFOinrelationtoequipmentfinancedecisionsincludingaccountingtreatment,balancesheetobjectives,operationalobjectives,equipmentutilizationandlender/lessorrelationships.TextChapters,casestudies&tradeperiodicalreadingwillbeassignedweeklytoaccompanypresentation/discussion.Monday&Wednesday,11:00A.M.-12:20P.M.30WohlersMon,03/15/10FIRSTCLASS1Introduction:DanSholem,AdjunctLecturer217-352-8700Office217-722-2444Celle.mail:drsholem@mindspring.comWebsite::AdvancedMicroDevices,Anchor-Hocking,CypressSemiconductor,FlextronicsInternational,MacquarieCapital,OldNationalBank,PennTankLines,SensoryTecimologies,R-Systems,N.A.,UniversityofMinnesota,etc.CourseObjectivesGetStudentsThinkingLikeaCFOThinkPro-ActivelyregardingallFactorsinLeasing&EquipmentFinanceEvaluateAllLeaseTerms,LeasePricing&StructureObjectivesUnderstandEquipmentValueFactors&EquipmentFinanceCapitalMarketsUseKnowledgetoputyourselfinapositionofNegotiatingStrengthWholeasestheircar?-Getthediscussionstartedfromapersonalview.Whydidyouleaseit?Whatisthelengthofthelease?Why?LowerPaymentsthanbuying?Why?Whatbenefit?Whathappensifyourlifechanges(married,kids,income)andyouwantoutoftheleaseearly?Doyouplanonbuyingthecarattheendofthelease?Doyoumaintain,insureandpaytaxesonthecar?Didyoupaymileagepenaltiesordamagepenaltiesuponreturn?rReadingAssignment:Chapters1,2,15&Articlesfrom(lASB)Guidelines(LessormusttakeEconomicOwnershipRisk):Leasedoesnottransferownershipatend;Leaseisforlessthan75%oftheeconomicusefullifeoftheasset;Nobargainpurchaseoption;PresentValueofRent90%ofAsset'sFMV.EquipmentCost(PossibleDiscountandPricingEffects)Term(period,AdvancedorArrears)ResidualValue(EquipmentType,Model,MarketDemand)DebtRate(LesseeCredit&LengthofTerm)Payment(Steppedorstructuredtomeetcash-flowrequirements)NetPresentValueCalculation(UsingyourHPCalculator)LessorPricingObjectiveslMethodsBasicsofOtherLeaseStructuresFinanceLeasesLeveragedLeasesCross-BorderLeasesVentureLeases:SyntheticLeasesOperatingLeasePricingModel(Spreadsbeets)ReadingAssignment:Chapters3,4,5,7plusSPRINGBREAKNO-CLASSMon,03/29110CFO/TreasurerDecisionMakingOff-BalanceSheetFinancing-LowDebtRatios,ROA,EBITDAReducedCash-Flow-BudgetFlexibility(Equipment&Cash-Flow)ReducedOwnershipRisk(Isthatso?)LeaseversusBuy(AdditionalFactors)InternalProcess(User,Purchaser,Controller,FinanceAnalyst,CFO)Lessee-LessorNegotiationUnderstandLessorObjectivesKnowYourEquipmentValuesLesseeCreditEvaluation-IstheDriverCreditorSales?ProvideyourLessorAccountManagerinformationtosellthedealinternallyReadingAssignment:Chapters8,10,Documents(examplesfromtext&itemsprovided)Wed,03/31/10LeaseDocumentationMasterLeaseAgreements(MLA)(ReturnConditions,ReturnLocation,AllofNone,AnyorAll,NoticePeriod)EquipmentSchedulesLetterofAcceptanceInsuranceCertificateUCCFilings(Tagging)......FerOtherTypesofEquipment-KnowyourMarketUsefulLife-Depreciation(AccountingPrinciples)DynamicsofEquipmentValue-EconomicsAppraisals(FairMarketValue)ResidualAnalysisExamples&DiscussionPointsUsingVariousEquipmentTypesTransportationEquipmentConstructionEquipment-YellowMetalManufacturingEquipmentComputersOfficeFurnitureSoftware?ie:CommercialAircraft&SemiconductorManufacturingEquipmentReadingAssignment:Chapters12,13,14Mon,04/05/10ChangesintheEquipmentLenderlLessorIndustryin200912010Wed,04/07/10Mid-TermReadingAssignment:Chapter11&AdditionalAssignedReadingMon,04/12110TheEquipmentLeasingIndustryCommercialFinanceCompaniesBankLessorsVendorLessorsIndependentLessorsEconomicAnalysisofEach&NegotiatingwithEachCost-BenefitofDoingBusinesswithEach.SecuritizingEquipmentFinance1LeaseAgreementsReadingAssignment:ToBeDeterminedWed,04114/10EquipmentLeasinglFinanceCareerRoles&Opportunities:LeasingSalesAccountingEquipmentRemarketingPortfolioManagementResidualAnalysisCapitalMarketsInteractionwithinaLending/LeasingInstitution.LenderlBorrower&LessorlLe