IPO15 How to understand the discount rate? above .

Since the lease guidelines have been updated, the right of use has also become an asset, and paying rent is similar to buying the right of use asset in installments.

Purchase in installments", presumably you are no strangers to Lao Tie.

Spend tomorrow's money and make today's dreams come true.

Money has a time value, and the calculation of time value is inseparable from the "discount rate", and this discount rate is the cost of capital for the lessee.

Regarding the discount rate, the textbook says:

When calculating the present value of the lease payment, the lessee shall use the interest rate embedded in the lease as the discount rate;

If the interest rate embedded in the lease cannot be determined, the incremental borrowing interest rate of the lessee shall be used as the discount rate.

Why, why?

A simple truth is:

If one step isn't feasible, settle for the next best.

Switching to the discount rate, that is:

If the most accurate one doesn't work, then settle for the next best thing and choose the next most accurate one.

The question is, what is the lease embedded interest rate, and why is it the most accurate?

I don't know what it is, just talk about why, we generally call it "".

The interest rate embedded in a lease is the interest rate at which the sum of the present value of the lessor's lease receipts and the present value of the unsecured residual value is equal to the sum of the fair value of the leased asset and the lessor's initial direct expenses.

This interest rate is the lessor's rate of return.

The lessor's rate of return is the lessee's cost of capital ratio.

Because what the seller earns is the price paid by the buyer.

Therefore, this discount rate is the rate that most accurately reflects the lessee's cost of capital, and there is no one.

The question is, how to get it?

The "unsecured residual value", "initial direct expenses of the lessor" and "fair value of the leased assets" in the formula are known to the lessor, but you, as the lessee, cannot know.

So what to do? Well, I can only lick my old face and ask the lessor.

Will the lessor tell you?

You guess. You go shopping, ask the boss can you tell me the purchase price? I want to know how much money you make me.

Does the boss not tell you or not tell you or not?

The pursuit of accuracy is good, but reality is not utopia.

If we can't get it, we won't measure it?

Apparently not. The sign of a person's maturity is not to be lacking rather than excessive, not to be demanding perfection, but to use it.

Isn't it the discount rate? Isn't it just the interest rate? Isn't it the cost of capital?

The bank lends you money, and the leasing company lends you something, essentially helping you with financing.

And the business of financing is fully competitive.

The platform you can finance will give you similar interest rates.

If you covet a platform with a much lower interest rate than you can get, you won't be able to raise capital at all.

In the case of a certain demand, the interest rate difference is large, mainly due to the qualifications of the lessee itself.

You are Wang Jianlin, with Wanda Group behind you as a guarantee, and major banks are lining up, holding the number plate of love to send you the best interest rate loan;

You don't have any collateral, just a bare factory, or rented, the bank girl told you, the door is there, remember to bring it when you go out.

If you have certain qualifications and needs, you can borrow money from the bank and finance from the leasing company, and the interest rate will not be too different.

Then the interest rate of borrowing from the bank by the lessee with the "right-of-use asset" as collateral, that is, the "incremental borrowing rate", will be used as a high imitation of the "interest rate embedded in the lease".

100% accuracy is good, but when you can't pursue it, the wise thing to do is not to just lift the table and lie down and stop drying, but to retreat to the next best thing, and achieve 90%, or 80% accuracy, is also much better than giving up directly.