Capital lease

A second type of lease exists a capital lease. It simulates ownership and forces the company to show the asset on the balance sheet through the asset and liability accounts. A company using a leased asset tries to have the lease classified as an operating lease rather than as a capital lease to keep the lease obligation off the balance sheet. Certain criteria must be met before a company can classify a lease as an operating lease. Although this is beyond the scope of the book, it... 

We lease certain retail locations, warehouses, distribution centers, office space, land, equipment and software. Assets held under capital leases are included in property and equipment. Operating lease rentals are expensed on a straight-line basis over the life of the lease beginning on the date we take possession of the property. At lease inception, we determine the lease term by assuming the exercise of those renewal options that are reasonably assured. The exercise of lease renewal options is at our sole discretion. The lease term is used to determine whether a lease is capital or operating and is used to calculate straight-line rent expense. Additionally, the depreciable life of leased assets and leasehold improvements is limited by the expected lease term. ... 

To further complicate matters, adding debt and other obligations back into the equation can modify book and market values. Items such as short- and long-term debts, capital lease obligations, and nonoperating liabilities matter when finding the true value of a company. Further, the valuation of a company varies based on whether or not a company continues over a period of time or is set to liquidate. Companies that continue to operate typically are valued higher than those set to liquidate because their assets will continue to produce revenues for extended periods of time. Conversely, liquidation values are seldom more than book value. They typically substantially less due to the level of obsolescence, coupled with the relatively specialized nature of such surplus equipment. 

The principal U.S. manufacturers and/or water service companies that sold or leased chlorine dioxide generating equipment and services in 1991 were Aquatec, Capital Controls, Chemquip, Drew Chemical (Division of Ashland Chemical), Eischer Porter, Prominent Eluid Controls, Rio Linda, and Wallace Tiernan. 

Sp ecial cases of capital investment decisions include lease or buy decisions, when-to-replace decisions, which design to choose, and comparison of alternatives with unequal service lives. These special cases are covered in Park (1997) and in Ruegg and Marshall (1990), as are the other methods for capital investment decisions. 

Most usually the pretreatment plant is a capital item fixed asset facility, but the trend is increasingly noticeable around the world today for the supply of properly conditioned MU water to be outsourced from a contractor, who either leases a mobile plant to the facility or generates a profit from the direct sale of water to the boiler plant. 

A company may get capital by selling a subsidiary or a portion of its business. In 1969 Monsanto decided that it would quit the low-density polyethylene business. It sold its plant at Texas City, Tex., plus its research findings and technology concerning low-density polyethylene to Northern Petrochemical.14 In the same year Atlantic Richfield paid 1800,000 for a 30% interest in a mining lease on about 8,560 acres of oilshale reserves in eastern Utah.15 W. R. Grace Co. sold its 53% interest in the Miller Brewing Company to Philip Morris for 130,000,000 and made an after-tax profit of 54,000,000.16 In 1969 it also sold its steamship business. 

Minnesota, as well as at a large-scale [30 gal/min (57 liters/min)] system. Capital equipment is either a one-time or monthly charge, depending on whether a leased, mobile unit or an amortized, skid-mounted unit is used (see Table 1). The cost of site-specific pre- or posttreatment such as oil/water separators, filters, etc. must also be considered (D12769P, pp. 231-232). 

As part of the U.S. Department of Energy (DOE) Heavy Metals in Contaminated Soils Treatability Project, total operating cost for the Campbell centrifugal jig is 1.07 per ton (1995 dollars). Capital costs to lease the centrifugal jig are estimated at 16,000 per month or 0.64 per ton. Costs considered in this operating cost estimate include the following ... 

At the Field Brook site near Ashtabula, Ohio, the total cost of the pilot-scale testing and demonstration was 638,670. Most of the cost was attributed to the procurement of capital equipment, plant operations, and laboratory analysis. Equipment was leased or acquired from other Department of Energy (DOE) sites in order to reduce costs. The fuU-scale remediation... 

Generally, capital outlay costs are lower because the modular, enclosed equipment is rented or leased during the remediation period at a fraction of the cost of a permanent plant (D13109Z,... 

The capital cost of ozone generators and associated monitoring and control systems is generally many times the cost of annual water treatment chemical programs. This has necessitated various lease schemes... 

To illustrate, a 30 kWe improvement in engine output is obtained from an increase in oxygen production of 6 tonnes per day, which requires 115 kW. The annual plant lease charge rises by 35,000 whereas the engine annual cost of capital frills by just 4,500. 

As soon as rent assumes the form of money-ient, and thereby the relationship between rent-paying peasant and landlord becomes a relationship fixed by contract - a development which is only possible generally when the world-market, commerce and manufacture have reached a certain relatively high level - the leasing of land to capitalists Inevitably also makes its appearance. The latter hitherto stood beyond the rural limits and now carry over to the country-side and agriculture the capital acquired in the cities and with it the capitalist mode of operation developed. ... 

The ratio of generic to originator price serves as a proxy for production, distribution, administrative, inventory, and working capital costs. It also includes the costs of facilities and equipment used to produce the product. These costs are recognized in the generic price as an effective rental or lease payment for such facilities.4... 

All recoating options include a full leak check and back pan nickel replacement. Spares can be made available on a lease basis to minimize capital investment while eliminating production losses. Anodes are inspected and, upon customer approval, repaired by using De Nora s proprietary techniques with different anode coatings available for any potential or oxygen evolution requirement. Each coating has different characteristics in resistance to shutdowns and iron, hydrogen overpotential, and price that can be tailored to specific plant needs. 

Chapter D of the statutory guidance provides a framework for allocating liabilities in cases where there are two or more persons falling within the heading of owner or occupier —there could, for example, be a linked series of leases over the same land, or the contaminated land could encompass more than one ownership plot. The guiding principle in the guidance is that, wherever possible, the allocation of liabilities should reflect the relative value of the capital interests in the land held by the various owners and occupiers. 

Another method to offset large, initial capital expenditures is to rent or lease expensive equipment to others. For example, the safety and loss prevention professional from X company could purchase the noise-level meter, and companies A, B, and C could rent or lease the noise-level meter for a specified period of time for a fee. The benefit of this type of arrangement is that the safety and loss prevention professional for company X would maintain ownership of the equipment, and the safety and loss prevention professionals from companies A, B, and C would have access to this expensive piece of equipment for a reduced fee. Compauy X cau offset the original capital expenditure for the equipment, and companies A, B, and C have the use of necessary equipment withont the major capital expenditure of the purchase. 

The nature of the underlying leases, the expiry profile of the leases, and the level of borrower responsibility for items such as capital expenditure and insurance. 

The capital cost, usually occurring in year 1, or in the case of a lease, payments over the lease period... 

Manage capital assets Acquiring, operating, and disposing of capital assets Includes buildings and equipment Provides facilities and equipment to product-producing operations as needs arise Makes decisions on purchases or leases and location... 

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