Purchase options provisions frequently included in

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Unformatted text preview: to re-lease assets at the expiration of the lease. purchase options Provisions frequently included in both operating and financial leases that allow the lessee to purchase the leased asset at maturity, typically for a prespecified price. 3. Leasing arrangements that include one or more third-party lenders are leveraged leases. Under a leveraged lease, the lessor acts as an equity participant, supplying only about 20 percent of the cost of the asset, and a lender supplies the balance. Leveraged leases have become especially popular in structuring leases of very expensive assets. A lease agreement normally specifies whether the lessee is responsible for maintenance of the leased assets. Operating leases normally include maintenance clauses requiring the lessor to maintain the assets and to make insurance and tax payments. Financial leases nearly always require the lessee to pay maintenance and other costs. The lessee is usually given the option to renew a lease at its expiration. Renewal options, which grant lessees the right to re-lease assets at expiration, are especially common in operating leases, because their term is generally...
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