Textbook treatments of the lease versus purchase decision

A survey of textbooks from agricultural economics and finance reveals agreement among the texts that the lease versus purchase decision should be based on a comparison of the present values of the after-tax cash flows associated with leasing versus purchasing. However, the texts disagree about the d...

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Bibliographic Details
Published inAgricultural finance review Vol. 61; no. 2; pp. 199 - 207
Main Author Miller, Stephen E.
Format Journal Article
LanguageEnglish
Published Bingley MCB UP Ltd 01.11.2001
Emerald Group Publishing Limited
Subjects
Agricultural economics
Cash flows
Discounting
Leasing
Leasing
Discounting
Cash flows
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Summary:A survey of textbooks from agricultural economics and finance reveals agreement among the texts that the lease versus purchase decision should be based on a comparison of the present values of the after-tax cash flows associated with leasing versus purchasing. However, the texts disagree about the discount factor and cash flows that should be used in the analysis. Most agricultural economics texts recommend discounting by the "cost of capital" while most finance texts recommend discounting by the after-tax cost of borrowed funds. Texts from both agricultural economics and finance disagree about the timing of lease payment tax shields.
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ISSN:0002-1466
2041-6326
DOI:10.1108/00214830180001124