Smith and Wakeman (1985)
Cash flows (present values) of
buying and leasing an asset:
|
Purchased |
Leased |
||
| Description of Cash Flow: |
Buyer/User (b) |
Owner/ Lessor (o) |
User/Lessee (u) |
| Nontax Cash Flows: | |||
| Initial investment in asset |
-INVb |
-INVb |
|
| Lease Payments |
+LEASEo |
-LEASEu |
|
| Salvage value of assets |
+SALVb |
+SALVo |
|
| Maintenance expense |
-MAINTb |
-MAINTo |
-MAINTu |
| Cash flow from asset's operation |
+CFLOWb |
+CFLOWu |
|
| Out-of-pocket contracting costs |
-COSTSb |
-COSTSo |
-COSTSu |
| Tax-Related Cash Flows | |||
| ITC |
+ITCb |
+ITCo |
+ITCu |
| Depreciation tax shield |
+tb(DEPb) |
to(DEPo) |
|
| Tax implications of lease payments |
-to(LEASEo) |
+tu(LEASEu) |
|
| Tax on capital gain from disposal of asset |
-tb(GAINb) |
-to(GAINo) |
|
| Tax shield from maintenance |
+tb(MAINTb) |
+to(MAINTo) |
+tu(MAINTu) |
| Tax on cash flows from operations |
-tb(CFLOWb) |
-tu(CFLOWu) |
|
| Additional debt interest tax shield generated by asset |
=tb(DEBTb) |
+to(DEBTo) |
+tu(DEBTu) |