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Corporate Equipment Lease Calculator (IFRS 16 / ASC 842)

Model corporate leasing vs. buying scenarios. Calculate NPV, analyze cash flows, and determine tax implications under MACRS depreciation for heavy machinery and IT assets.

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Asset & Loan Parameters
Lease Parameters
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About

For CFOs and asset managers, the decision to lease or buy equipment is a balance of liquidity, tax strategy, and balance sheet implications. Under accounting standards like IFRS 16 and ASC 842, operating leases must now be capitalized, making the analysis of Net Present Value (NPV) crucial. This tool compares the total cost of ownership of purchasing an asset (with MACRS depreciation tax shields) against the cash outflows of a lease.

Key considerations include the corporate discount rate (WACC), the tax bracket, and the asset's residual value. By discounting future cash flows to present value, this model reveals the true financial cost of each option in today's dollars.

corporate-finance lease-vs-buy npv-calculator ifrs16 equipment-finance

Formulas

The Net Present Value is the sum of discounted cash flows. For the purchase option, cash flows include the initial outlay, maintenance, and tax savings from depreciation.

NPV = n∑t=0 CFt1+rt

Where CFt is the net cash flow at time t, and r is the discount rate. Depreciation tax shield at year t is Dt × TaxRate.

Reference Data

Asset Class (MACRS)Recovery Period1st Year Depr. RateExamples
3-Year Property3 Years33.33%Tractor units, Race horses
5-Year Property5 Years20.00%Computers, Vehicles, Copiers
7-Year Property7 Years14.29%Office Furniture, Fixtures
10-Year Property10 Years10.00%Vessels, Single-purpose ag.

Frequently Asked Questions

MACRS (Modified Accelerated Cost Recovery System) is the current tax depreciation system in the US. The "Tax Shield" is the amount of income tax saved by deducting depreciation expenses from taxable income. This saving effectively reduces the cost of purchasing the equipment.
The discount rate reflects the time value of money, typically the company's Weighted Average Cost of Capital (WACC). A higher discount rate reduces the present value of future lease payments, potentially making leasing appear more attractive than a large upfront cash outlay.
While this tool calculates cash flow NPVs, IFRS 16 requires lessees to recognize a "Right-of-Use" asset and a lease liability on the balance sheet. This calculator focuses on the economic comparison (Cash Flow perspective) rather than the accounting journal entries.