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Article: Residual value risk in the lease-or-buy analysis.
- Article from:
- Journal of Academy of Business and Economics
- Article date:
- January 1, 2003
- Author:
CopyrightCOPYRIGHT 2003 International Academy of Business and Economics. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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ABSTRACT
Whether debt and lease are substitutes or complements is one of the major issues in leasing literature. Most of the academic literature on leasing focused on the tax deduction as one of the main motivations for the leasing alternative. Some of them discussed the issue of residual value in pricing the leasing contracts. However, no one carefully examined the impact of both taxes and residual value on the lease-or-buy decision. This study intends to incorporate both the tax liability and the residual value risk in the analysis of lease-or-buy decisions and the relation between debt and leases. This paper develops a simple model to illustrate the effects of ...