W7_Austin_Leasing as Projects Financing Option

1.  Problem recognition, definition and evaluation

As a result of cash squeeze (cash-flow constraints) and the huge capital outlays involved in projects execution and delivery, leasing is being seen by many as alternative option to make procurement of assets required for project implementation, execution and delivery in Nigeria - as a case study. Therefore there is need evaluating the problem statement to determine which of the various forms of leasing is the best financing option in project execution and delivery in Nigeria. 

2.  Development of the feasible alternatives

There are five major forms of leasing financing options available to projects execution and delivery in Nigeria:

1.   Finance lease

2.   Operating lease

3.   Sale and Lease Back

4.   Leverage leasing

5.   Syndicate Lease

3. Development of the outcomes and cash flows for each Alternative

Table 2 illustrates the application of lexicography to the ordinal ranking developed in Table 3, which shows Finance Lease as the best attribute and Operating Lease as the second best attribute.

4. Selection of the acceptable criteria

Leasing option suitability is dependent on the urgency of acquiring resources to meet up with cost benefit, timely delivery, quality specifications and standards of project execution and delivery as illustrated below in a Non-dimensional scaling table:

5.  Analysis and Comparison of the alternatives

Analyzing and comparing the alternatives using ordinal ranking model, the first choice would be Finance Lease rated ‘Excellent’ due to high cost benefit attribute. The second choice would be Operating Lease rated ‘Good’ due to high quality attribute. Ordinal ranking is necessary in order to have a believable overall scale for selecting the best alternative.

6.  Selection of the preferred alternative

Amongst selected attributes, subject to ordinal ranking table-3, Finance Lease (option A), is the top ranked attribute and the most frequently used alternative Project Financing option. Hence it is the Best and preferred alternative.
7.  Performance Monitoring and Post Evaluation of Results

Performance monitoring and evaluation based on identified leasing attributes of cost benefit, timely delivery, quality specifications and standards of project execution and delivery illustrated in a Non-dimensional ordinal table:

Finance Lease rated ‘Excellent’ due to high cost benefit top ranked attribute. Operating Lease rated ‘Good’ due to high quality attribute ranked second. Hence, Option A (Finance Lease) is final and the Best Choice.

8.  References/Bibliography

1.   Fawkes, F.D. (2000) THE JOURNAL OF PROJECT FINANCE 21. Leasing can and has been used to finance all types of assets including, but not limited to, industrial facilities ...Retrieved from: http://www.iijournals.com/doi/abs/10.3905/jsf.2000.320184

2.   Sullivan, W. G., Wicks, E.M., & Koelling, C.P. (2012). Engineering Economy (15th ed.), Chapter 14. Retrieved from: http://www.amazon.com/Engineering-Economy-15th-William-Sullivan/dp/0132554909

3.   Hollmann, J. K. PE CCE (2012), Integration of Skills & Knowledge of Cost Engineering. SECTION 1—COST. 1. Cost Elements ... Retrieved from: http://rasalghul.its.iastate.edu/forms/costengtoc.pdf