The Evaluation of Leveraged Leases

Abstract

One of the most widely debated topics in financial management during the late 1950s and early 1960s was the analysis of investment proposals with more than one rate of return [5, 6, 7, 10, 11]. Although the issue generated considerable academic interest, it was not until the recent popularity of leveraged leasing that the multiple rate of return problem assumed practical significance. Several alternative approaches to the evaluation of leveraged leases have appeared in the literature [3, 4, 6, 9, 14]. Our paper evaluates some of the more common methods of measuring the economic desirability of a leveraged lease. Despite the apparent differences between the various methods, all the commonly-used discounting models, when properly implemented, will lead to the same accept or reject decision.