TRADITIONAL CAPITAL ASSET yield evaluations are developed primarily for situations in which a negative outlay is followed by a series of future positive inflows with a sum greater than the initial outflow. The problems relating to the evaluation of more complex situations involving losses before termination were observed by Lorie-Savage [71], and Solomon [13], as a paradox leading to dual rates of return. Teichroew, Robichek, and Montalbano [15, 16] explored the mathematical implications of multiple rates of return for projects with mixed characteristics and proposed a generalized analytical procedure for solution.' The multiple rate of return problem usually occurs only in rare instances. A leveraged lease, however, is a mixed project which is no longer an unusual situation. Leveraged leasing is gaining an increased importance in the financial community. Many large banks, investment banking firms, leasing companies, and large corporations are engaging in it either as a source of funds, or as an investment. Unfortunately, the standard analysis calculates an internal rate of return for the general leveraged lease situation, which may not be consistent with the firm's cost of capital or yields on other investment opportunities. It is the purpose of this paper to explore the fundamental financial implications of the leveraged lease, demonstrate the inadequacies of the traditional computational techniques, and formulate a reliable method for the calculation of a meaningful yield on the participant's equity investment.