Case 39 Primus

Automation Division 2002

 In 2002, Tom Baumann, an analyst in the

Marketing and Sales Group of the Factory
Automation Division of Primus Corporation,
had to recommend to the division sales
management, Jim Feldman, the terms under
which Primus would lease one of its advanced
systems to Avantjet Corporation.
Three months ago, Primus won an apparent
competition for Advantjets business. But
due to declining stock price and worsening
balance sheet under the economic recession,
CEO had just ordered a moratorium on any
capital expenditure.

 Baumann needs to find the way to

make the sale constructing terms
attractive to Aventjet.

 Q1: Discuss operating lease and

capital lease
Q2: Out of 4 options, which one is
best for the Aventjet?
Q3: Do you believe there is still a
way to make the option attractive to
Aventjet? If so, how ? (payments,
residual value, tax rate, discount
rate)