Primus Automation

1. Primus Automation does not currently pursue leases as a way to garner more income for themselves. However, as an industry leader they need to pursue all options to ensure that they remain competitive and do not lose market share to many of the competitors that are continuously innovating. Avantjet is a company that is growing in sales numbers and has a very strong balance sheet. From Bauman’s standpoint, Avantjet would be a company that could be a long-term consumer and therefore it is very necessary to provide Avantjet with any means that could sway them to Primus. Whether this be leasing or altering capital structures, Primus needs to give the best possible lease proposal to Avantjet.

2. See Attached Excel Spreadsheet

3. See Attached Excel Spreadsheet for Faulhaber and Honshu leasing plans. Faulhaber and Honshu both have higher selling prices for their systems if Avantjet were to buy which directly relates to having higher leasing terms for the 5-year operating leases. However, this also leads to higher residual values at the end of the term. These are very enticing options for a company to consider, especially since Avantjet is on record for saying that they are worried about obsolescence. A higher residual value at the end of term would allow Avantjet to upgrade systems in the future while still retaining some savings from the old obsolete equipment.

4. Leasing option 3 would be the best option for Primus to provide to Avantjet as the possible deal. Although options 3 and 4 both provide a positive NPV, the net leasing advantage is less than from Faulhaber so there would be a risk of losing the business.