Part 1

Lease payment 410,000

Interest Rate 6%
No of payments 5
Tax rate 40%

Case of lease 0 1 2 3
Lease 246,000 246,000 246,000 246,000
Residual value
After tax cash flows 246,000 246,000 246,000 246,000
246,000 237,452 229,201 221,236
PV 1,225,564

Case of Buy
1 2 3 4
Loan beginning principal 2,570,000 2,114,091 1,630,828 1,118,569
Loan payment 610,109 610,109 610,109 610,109
Loan interest 154,200 126,845 97,850 67,114
Loan principal 455,909 483,263 512,259 542,995
Depreciation 514,000 514,000 514,000 514,000
Tax shield 267,280 256,338 244,740 232,446
After tax cash flows 342,829 353,771 365,369 377,663
PV of each cash flow 330,916 329,611 328,588 327,843
PV of Buy cost 1,644,328

It should lease
 4
246,000
90,000
336,000
291,676

5
575,574
610,109
34,534
575,574
514,000
219,414
390,695
327,370
Initial loan 100000
Years Int Rate
Period 1 5 6%
Period 2 3 8%
Period 3 7 9%

Tenor 15

Required payment $10,960.52

Assumption This model works for upto 15 years of loan

Year Beginning balance Annual Payment Principal Interest
1 100000 $10,960.52 $4,960.52 $6,000.00
2 $95,039.48 $10,960.52 $5,258.15 $5,702.37
3 $89,781.33 $10,960.52 $5,573.64 $5,386.88
4 $84,207.69 $10,960.52 $5,908.06 $5,052.46
5 $78,299.64 $10,960.52 $6,262.54 $4,697.98
6 $72,037.10 $10,960.52 $5,197.55 $5,762.97
7 $66,839.55 $10,960.52 $5,613.35 $5,347.16
8 $61,226.19 $10,960.52 $6,062.42 $4,898.10
9 $55,163.77 $10,960.52 $5,995.78 $4,964.74
10 $49,167.99 $10,960.52 $6,535.40 $4,425.12
11 $42,632.59 $10,960.52 $7,123.58 $3,836.93
12 $35,509.01 $10,960.52 $7,764.71 $3,195.81
13 $27,744.30 $10,960.52 $8,463.53 $2,496.99
14 $19,280.77 $10,960.52 $9,225.25 $1,735.27
15 $10,055.52 $10,960.52 $10,055.52 $905.00
Remaining Principal Interest Rate
$95,039.48 6%
$89,781.33 6%
$84,207.69 6%
$78,299.64 6%
$72,037.10 6%
$66,839.55 8%
$61,226.19 8%
$55,163.77 8%
$49,167.99 9%
$42,632.59 9%
$35,509.01 9%
$27,744.30 9%
$19,280.77 9%
$10,055.52 9%
($0.00) 9%
6%