a. "Many corporations have found the equity markets to be closed, and many have not been able to raise cash at any price and therefore have had to abandon plans for expansion and capital replacements. During this period, an overlooked method of raising cash on advantageous terms is the sale-leaseback." Discuss the advantages of Lessee and Lessor for sale-leasebacks in real estate.
a. "Many corporations have found the equity markets to be closed, and many have not been able to raise cash at any price and therefore have had to abandon plans for expansion and capital replacements. During this period, an overlooked method of raising cash on advantageous terms is the sale-leaseback." Discuss the advantages of Lessee and Lessor for sale-leasebacks in real estate.
b. Assume a $1,200,000 facility that XYZ company, a 40% bracket taxpayer, has just purchased that include land with a $200,000 cost, a 5 year economic life, and an anticipated residual value at the end of 4 year of $600,000. Analysis required for 100% mortgage at 12% interest, self-liquidating over a 4 year period (payments yearly in arrears) with a 4 year sale-leaseback where the annual rent payments (also made yearly in arrears) are equal to the total debt service of the mortgage.
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