Details

Case

Educator Copy

Pilcorp Limited

Salman Shah


INDUSTRY : Leasing

AREA : Finance

ORGANIZATION : Pilcorp Limited

LENGTH : 7

LUMS No : 02-167-89-1

PUBLICATION YEAR : 1989

DESCRIPTION

KEYWORDS:

Pilcorp,Limited,Finance,Leasing,Banking,NPV,Leasing Industry


DESCRIPTION:

The case focuses on the method of evaluating leases from the lessor's point of view. Burhan Khan, Senior Marketing Officer of Pilcorp was asked to explore the feasibility of a lease swapping proposal by American Express Banking Corporation. This included the calculation of a cost of capital for the company and the identification of relevant cash flows. The decision could then be made by estimating the NPV of the lease or by calculating the IRR and comparing it to the cost of capital. The case also provides students with a brief background of the leasing industry in Pakistan.


LEARNING OBJECTIVES:

1) Introduce students to the financing needs of a newly established leasing company. 2) To provide a framework for making investment decisions by a financial institution. 3) Introduce the notion of transferring assets from the books of one institution to the other, and the evaluation of critical variables which could make such transactions profitable for both the parties.


SUBJECTS COVERED:

Finance