It is January 1st, 2018. You are a senior analyst at Pear Computer Horizons Limited (PCH), one of the leading global technology firms for computers, cell phones, and business services in Canada. The CEO of PCH, Amanda Morrison, has reached out to you to look at two options regarding an investment, building on your analysis from Assignment 1 and Assignment 2.
Table of Contents
Purpose
How to Proceed
Format for Submission
Grading
Pear Computers Horizons Case Study
Weighted Average Cost of Capital (WACC)
Purpose
Under this case approach, you will demonstrate your ability to undertake a detailed analysis to evaluate the buy versus lease options for an investment proposal, on a qualitative and quantitative basis. You will also be required to calculate the weighted average cost of capital (WACC). A supplementary scenario analysis of leasing options is required.
How to Proceed
Create a title page with your purchase versus lease report name and author identification.
Explain the advantages and disadvantages of leasing, including the possible reasons, right or wrong, that would make a company lease an asset (from the lessor and lessee perspective).
Calculate the weighted average cost of capital (WACC) to use in your net advantage to leasing (NAL) analysis, rounding to the nearest one tenth of a percent.
Prepare your Net Advantage to Leasing analysis of the investment using the WACC as the discount rate. In addition, determine the impacts of the sensitivity analysis in the case, including
changes in payments from beginning of period to end;
changes in salvage value;
security deposit; and
the break-even lease payment.
Explain and evaluate if the investment should be purchased or leased, depending on the different scenarios analyzed.
Determine the classification of the lease option being considered, and indicate what the effect would be on the statement of financial position.
Format for Submission
Your report narratives may be done in Word or Excel, but calculations and tables of values must be prepared in Excel with the amounts derived from actual formulas that use your variables, rounded to four (4) decimals or lower.
The Excel tab worksheet must be print and presentation ready, formatted to print in 2 to 3 pages without page fragmentation of equations or tables between pages.
It is permissible to break your report down using the questions listed above as headings.
Submit your report file(s) into the Assignment 3: Case Study dropbox on UM Learn.
