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 Advantjet’s 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)

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