CHAPTER 27

 THE DECISION TO LEASE

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AT WARF
WARF COMPUTERS

1.

 The decisio !o "#$ o% &e'se is ('de "$ &oo)i* '! !he ic%e(e!'&
ic%e(e!'& c'sh +o,s.
 The ic%e(e!'& c'sh +o,s -%o( &e'si* !he ('chie
('chie '%e
 '%e !he sec#%i!$ deosi!/
!he &e'se '$(e!s/ !he !'0 s'i*s o !he &e'se/ !he &os! de%eci'!io !'0
shie&d/ !he s'ed #%ch'se %ice o- !he ('chie/ 'd !he &os! s'&'*e '&#e. The
s'&'*e '&#e o- !he e#i(e! i -o#% $e'%s ,i&& "e3

A-!e%!'0 s'&'*e '&#e 4 56/ 8 56/9.:;< A-!e%!'0 s'&'*e '&#e 4

5:=/

 This is ' oo%!#i!$ cos!

cos! !o W'%-
W'%- Co(#!e%s sice i- !he co('$
co('$ &e'ses
 &e'ses !he
e#i(e! i! ,i&& o! "e '"&e !o se&& !he e#i(e! i -o#% $e'%s. The &e'se
'$(e!s '%e d#e '! !he "e*ii* o- e'ch $e'%/ so !he ic%e(e!'& c'sh +o,s
'%e3

S'ed #%ch'se Los! s'&'*e '&#e Los! de. !'0 shie&d Sec#%i!$ deosi! Le'se
'$(e!

 T'0
 T'0 o &e'se '$(e! C'sh +o,
+o, -%o( &e'si*

5;//

85;>:/27; 85777/>7; 852;=/17;

8:/ 81/:/ 81/:/ 81/:/ 81/:/ ?;;/ ?;;/

?;;/ ?;;/ 5:/>;;/ 851/?2>/27; 851/622/>7; 851/1?/17;

85:=/ 812=/67; :/

8521=/67;

 The '-!e%!'0 cos! o- de"! is3

A-!e%!'0 cos! o- de"! 4 .1191 8 .:;< A-!e%!'0 cos! o- de"! 4 .71; o% 7.1;@ Ad
!he NAL o- !he &e'se is3

NAL 4 5:/>;;/ 8 51/?2>/27;1.71; 8 51/622/>7;1.71;2 8

51/1?/17;1.71;: 8 521=/67;1.71;? NAL 4 5??/:>.

 The co('$ sho#&d &e'se !he e#i(e!.

C72 CASE SOLUTIONS 2.

 The "oo) '&#e o- !he e#i(e! i $e'% 2 ,i&& "e3 Boo) '&#e 4 5;// 8
5;//9.::::  .???;< Boo) '&#e 4 51/111/

So/ !he '-!e%!'0 s'&'*e '&#e i $e'% 2 ,i&& "e3

A-!e%!'0 s'&'*e '&#e 4 52//  951/111/ 8 2//<9.:;< A-!e%!'0

s'&'*e '&#e 4 51/6>>/>;

So/ !he NAL o- !he &e'se #de% !he e, !e%(s ,o#&d "e3

S'ed #%ch'se Los! s'&'*e '&#e Los! de. !'0 shie&d Le'se '$(e!
 T'0 o &e'se '$(e! C'sh +o, -%o( &e'si*

5;//

851/6>>/>; 85;>:/27; 8777/>7;

82/:/ 82/:/ >;/ >;/ 5:/;;/ 852/7>/27; 852/?66/72;

So/ !he NAL o- !he &e'se #de% !hese !e%(s is3

NAL 4 5:/>;/ 8 52/7>/27;1.71; 8 52/?66/72;1.71;2 NAL 4 8

5;>:/==.11

 The NAL o- !he &e'se is e*'!ie #de% !hese !e%(s/ so i! 'e'%s !he !e%(s '%e
&ess -'o%'"&e -o% !he &essee. Ho,ee%/ !he &e'se ,i&& &i)e&$ "e c&'ssied 's '
oe%'!i* &e'se. The &e'se is o, -o% !,o $e'%s/ ,hich is &ess !h' 7; e%ce! o-
!he e#i(e!s &i-e 'cco%di*. Usi* !he co('$s cos! o- de"!/ !he %ese!
'&#e o- !he &e'se '$(e!s is3 P o- &e'se '$(e!s 4 52/:/ 
52/:/1.11 P o- &e'se '$(e!s 4 5?/:72/72.7

 This is &ess !h' = e%ce! o- !he %ice o- !he e#i(e!. As &o* 's !he &e'se
co!%'c! does !%'s-e% o,e%shi !o !he &essee '! !he ed o- !he co!'c!/ o% '&&o,
-o% ' #%ch'se '! ' "'%*'i %ice/ !he FAS 1: codi!ios -o% ' c'i!'& &e'se '%e o!
(e!. As s#ch/ !he %e'so -o% s#**es!i* !he %eised &e'se !e%(s is #e!hic'& o
Nic)s '%!. A&so/ o!ice !h'! !he #es!io '&so s!'!es !h'! i- !he &e'se is %ee,ed
i !,o $e'%s/ !he &esso% ,i&& '&&o, -o% !he ic%e'sed &e'se '$(e!s ('de oe%
!he %s! !,o $e'%s. This is '&so ' idic'!io !h'! !he %eisio is -o% &ess !h'
e!hic'& %e'sos.

CHAPTER 27 C7:

:. '.

 The ic&#sio o- ' %i*h! !o #%ch'se !he e#i(e! ,i&& h'e o eGec! o !he
'&#e o- !he &e'se. I- !he co('$ does o! #%ch'se !he e#i(e!/ i! c' *o o
!he ('%)e! 'd #%ch'se ide!ic'& e#i(e! '! !he s'(e %ice.

 The %i*h! !o #%ch'se !he e#i(e! '! ' 0ed %ice ,i&& ic%e'se !he '&#e o-
!he &e'se. I- !he co('$ c' #%ch'se !he e#i(e! '! !he ed o- !he &e'se '!
"e&o, ('%)e! '&#e/ i! ,i&& s'e (oe$/ o% '! ' (ii(#(/ c' #%ch'se !he
e#i(e! '! !he 0ed %ice 'd %ese&& i! i !he oe ('%)e!. This is ' %e'&
o!io/ !he%e-o%e h's '&#e !o !he &essee. I! is ' c'&& o!io o !he e#i(e!. As
s#ch/ i! (#s! h'e ' '&#e #!i& i! e0i%es o% is e0e%cised. I! is '&so i(o%!'! !o
o!e !h'! !his ,o#&d &i)e&$ (')e !he &e'se co!%'c! ' c'i!'&ied &e'se.

 The %i*h! !o #%ch'se !he e#i(e! '! ' "'%*'i %ice is '&so ' %e'& o!io -o%
!he &essee/ 'd ,i&& ic%e'se !he '&#e o- !he &e'se. I! is ' c'&& o!io/ 'd
!he%e-o%e ,i&& h'e '&#e #!i& i! e0i%es o% is e0e%cised. This co!%'c! codi!io
,i&& dei!e&$ es#%e !he &e'se is c&'ssied 's ' c'i!'&ied &e'se.

".

c.

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 The c'ce&&'!io o!io is '&so ' %e'& o!io. The c'ce&&'!io o!io is ' #!
o!io o !he e#i(e!. I! ,i&& ic%e'se !he '&#e o- !he &e'se sice !he &essee
,i&& o&$ e0e%cise !he o!io ,he i! is !o !he &essees 'd'!'*e.