1. Nonrecourse debt Lenders to

1. Nonrecourse debt Lenders to leveraged leases hold nonrecourse debt. What does “nonrecourse” mean? What are the benefits and costs of nonrecourse debt to the equity investors in the lease?

2. Leveraged leases How does a leveraged lease differ from an ordinary, long-term financial lease? List the key differences.

3. Leveraged leases How would the lessee in Figure 25.1 evaluate the NPV of the lease? Sketch the correct valuation procedure. Then suppose that the equity lessor wants to evaluate the lease. Again sketch the correct procedure. (Hint: APV. How would you calculate the combined value of the lease to lessee and lessor?)

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