IDEAS home Printed from https://ideas.repec.org/a/inm/ormnsc/v39y1993i12p1544-1551.html
   My bibliography  Save this article

A Practical Derived Lease Rate Algorithm

Author

Listed:
  • Eyal Gutman

    (The Technion, Israel Institute of Technology, Haifa, Israel)

  • Joseph Yagil

    (Department of Business Administration, Haifa University, Haifa, 31999, Israel)

Abstract

Underlying the widely used multiple-investment-sinking fund (MISF) method for lease evaluation is the determination of a derived lease rate which is a specific rate that provides the lessor with the required yield on equity. To compute this derived lease rate, trial-and-error techniques are traditionally used. In addition to being based on trial-and-error, the employment of these techniques requires a specification of the precise time structure of the various types of cash flows involved, and this can be somewhat technically cumbersome. To overcome these shortcomings, this study presents a mathematical derivation of a formal expression for the derived lease rate. Due to the widespread use of the MISF method, it seems that the formal expression developed here can be very useful for decision makers (at both the corporate as well as the individual-investor levels) in determining the derived lease rate in practice. Another desirable property of the model is that it can be easily employed for the purpose of studying the effects of changes in the various parameters involved on the derived lease rate.

Suggested Citation

  • Eyal Gutman & Joseph Yagil, 1993. "A Practical Derived Lease Rate Algorithm," Management Science, INFORMS, vol. 39(12), pages 1544-1551, December.
    • Handle: RePEc:inm:ormnsc:v:39:y:1993:i:12:p:1544-1551
    DOI: 10.1287/mnsc.39.12.1544
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1287/mnsc.39.12.1544
    Download Restriction: no
    File URL: https://libkey.io/10.1287/mnsc.39.12.1544?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:ormnsc:v:39:y:1993:i:12:p:1544-1551. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Asher (email available below). General contact details of provider: https://edirc.repec.org/data/inforea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.