The management of the group following a specialist's suggestion gets in touch with the Sunshine Financial Leasing Company $($SFLC$)$ and is informed that its investment problem can be addressed through financial leasing. Financial leasing is an alternative way of raising fund, in which a lesser, according to the requirement of a lessee, signs a pur$-$ chasing contract with a supplier, as well as a leasing contract with the lessee. The lesser promises the lessee the right of using the equipment under the condition that the latter pays the rent. The lessee, upon making full payment of the rent on expiry date, gains the ownership of the equipment.

Obviously, the payment structure of rent in international leasing business is impor$-$ tant for the lesser and the lessee. There are different ways to calculate rent, and the most common one is called "equal sharing" approach. Generally speaking, the rent consists of original price of equipment, leasing interest rate, profit, service fee, estimated nominal price of the equipment, etc.

The equation is shown as follows:

$($original price$+$freight$+$insurance$-$remaining value$)$

each payment$=-+$interest$+$profit $+$ service fee total times of payment

The length of leasing period depends on the life of equipment. For instance, equip$-$ ment of low value is within $3$ years; plants, machinery equipment, computers and the like are about $5$ years; aircraft, ship and railway rolling stocks are about $10$ years. Normally, the length of leasing period is counted as $75\%$ of equipment life.

Agreement Reached and Remaining Issues

After the first round of negotiation, SFLC agrees to pay all the expenditure of the equipment and soft ware at one time and lease them to the group. On the expiry date, the ownership is transferred to Sanfeng Group. In the following negotiation, both sides will talk about way of rent payment, service fee $($one shot payment$),$ leasing interest rate $($ac$-$ cording to purchasing price of equipment$),$ expiry date and date of rent payment.

Work out your hidden agenda according to the importance of the issues. Make decision on what interests that you will defend and where you can make concession.

You can compare leasing with having bank loans, considering such factors as bank interest rate, service fee, tax rate paid and leasing interest rate. Try to reach an agreement on the major issues satisfying both sides' most important interests.