Simulation 2 Financial Leasing Negotiatine Lintroduction Sanfeng Group in Lin County is a manufacture of machine tools Teaching a relatively large scale For purpose of winning market competition, the group has decided to replace the obsolete equipment with news including hard and soft equipment of special machine tools, IT system and network The calculation of the investment reveals that the renewal amounts to 1.200 million yuan. If the group makes the payment with its own fund, it will be a heavy burden for the group although the restoration mana remarkable improvement of efficiency and pathare of the groupThe shormative of the group is to apply for bank loans because it keeps a good credit record The option of doing the renewalesing either its own fundo bank loans has a few problems firstly, the group my have to pay high tax rate because the legal depreciation of the equipment is 15 years secondly, the borowing would increase the ratio of liabilities of the gross which is detrimental to its corporate bondining and thirdly the fluctuation of cash flow is also challenging because the equipment supplier demands for the full payment within 18 months and 60% of payment should be made in first three months. The management faces the great challenge of high cash payment in the initial period and managing financial stability The management of the group following a specialist suggestion gets in touch with the Sunshine Financial Leasing Company (SFLC) and is informed that is investment problem can be addressed through financial leasing, Financial leasing is an alternative way of raising fund, in which a lesset, according to the requirement of a lessee, signs a purchasing contract with a supplies, as well as a leasing contract with the lesse The lect promises the lessee the right of using the quiet under the condition that the latter pays thet The lessee, upon making full payment of the rent on paring date, gains the ownership of the equipment Obviously, the payment structure of rent in international leasing business is important for the lower and the lessee. There are different ways to calculate and the most common one is called equal sharing approach. Generally speaking the recons of original price of equipment, leasing interest rate profit service fee, estimated nominal price of the open clc The equation is shown as the following cach payment The length of leasing period depends on the life of equipment for instance, equipment of low less within 3 years, plants, machinery equipment, com and the like are about 5 years, aircraft ship and by stocks are about 10 years. Normally, the length of lang period is counted as 75% of equipment life 2.Agreement Reached and Remaining issues After the first round of negotiation. SFLC agrees to pay all the expenditure of the equipment and software one time and lease them to the group on the expiry Salic the ownership is transferred to the Sanfeng Group In the following negotiation, both sides will talk about way of rent payment service fee (one shot payment, leasing interest rate (according to purchasing pee of equipment), expiry date and date of rent payment 2.Necotiation Requirement Work out your hidden agenda according to the importance of the issues. Make decision what interests you will defend and where you can make concession You can compare leading with having bank loans considering such factors as bank interest rate, sense fee. tax rate paid and leasing interest rate Simulation 2 Financial Leasing Negotiatine Lintroduction Sanfeng Group in Lin County is a manufacture of machine tools Teaching a relatively large scale For purpose of winning market competition, the group has decided to replace the obsolete equipment with news including hard and soft equipment of special machine tools, IT system and network The calculation of the investment reveals that the renewal amounts to 1.200 million yuan. If the group makes the payment with its own fund, it will be a heavy burden for the group although the restoration mana remarkable improvement of efficiency and pathare of the groupThe shormative of the group is to apply for bank loans because it keeps a good credit record The option of doing the renewalesing either its own fundo bank loans has a few problems firstly, the group my have to pay high tax rate because the legal depreciation of the equipment is 15 years secondly, the borowing would increase the ratio of liabilities of the gross which is detrimental to its corporate bondining and thirdly the fluctuation of cash flow is also challenging because the equipment supplier demands for the full payment within 18 months and 60% of payment should be made in first three months. The management faces the great challenge of high cash payment in the initial period and managing financial stability The management of the group following a specialist suggestion gets in touch with the Sunshine Financial Leasing Company (SFLC) and is informed that is investment problem can be addressed through financial leasing, Financial leasing is an alternative way of raising fund, in which a lesset, according to the requirement of a lessee, signs a purchasing contract with a supplies, as well as a leasing contract with the lesse The lect promises the lessee the right of using the quiet under the condition that the latter pays thet The lessee, upon making full payment of the rent on paring date, gains the ownership of the equipment Obviously, the payment structure of rent in international leasing business is important for the lower and the lessee. There are different ways to calculate and the most common one is called equal sharing approach. Generally speaking the recons of original price of equipment, leasing interest rate profit service fee, estimated nominal price of the open clc The equation is shown as the following cach payment The length of leasing period depends on the life of equipment for instance, equipment of low less within 3 years, plants, machinery equipment, com and the like are about 5 years, aircraft ship and by stocks are about 10 years. Normally, the length of lang period is counted as 75% of equipment life 2.Agreement Reached and Remaining issues After the first round of negotiation. SFLC agrees to pay all the expenditure of the equipment and software one time and lease them to the group on the expiry Salic the ownership is transferred to the Sanfeng Group In the following negotiation, both sides will talk about way of rent payment service fee (one shot payment, leasing interest rate (according to purchasing pee of equipment), expiry date and date of rent payment 2.Necotiation Requirement Work out your hidden agenda according to the importance of the issues. Make decision what interests you will defend and where you can make concession You can compare leading with having bank loans considering such factors as bank interest rate, sense fee. tax rate paid and leasing interest rate