Depreciation tax shield $225,750 Scanner costs

Aftertax lease payment $1,007,250 NPER

OCF $1,233,000 You can lease it
Aftertax debt cost 6.32% TaxRate
NAL $58,646.08 Lease You can borrow

NAL ($58,646.08)

NAL $0 OCF $1,250,048.95

Aftertax lease payment $1,024,298.95
Break-even lease payment $1,296,580.95

NAL $77,038.28

NAL $0 PMT $1,298,259.46

Total payment range $1,296,580.95 ~ E15

Year:1 OCF $1,308,220 3-year MACRS

Year:2 OCF $1,408,634 0.3333
Year:3 OCF $1,140,984 0.4445
Year:4 OCF $1,074,162 0.1481
0.0741
NAL $33,392.96
$4,300,000
4
$1,275,000 per year
21%
8% before taxes
Depreciation tax shield $26,250 Machine costs $625,000
Aftertax lease payment $122,450 NPER 5
OCF $148,700 Lease payments $155,000
Aftertax debt cost 5.53% YTM 7%
NAL ($9,469.25) TaxRate 21%
a. NPER 5
NAL $0 Costs Equipment $725,000
PMT $186,392.03 TaxRate for Lessor 23%
Borrow 9% Each firm
b.
Depreciation tax shield $33,350
Aftertax debt cost 6.93%
NAL $0 $0
PMT $185,895.42

$185,895.42 ~ $186,392.03
Depreciation tax shield $368,760 Pretax cost savings $2,800,000
Aftertax lease payment $1,540,500 The system costs $8,780,000
Aftertax debt cost 5.53% NPER 5
NAL $270,134.62 $270,134.62 TaxRate 21%
Borrow 7%
NAL $0.00 Lease $1,950,000
X $1,600,493.57 Salvage Value $900,000
Pretax lease payment $2,025,941.23 Security deposit $600,000

NAL $0.00 Lease payment $420,000

X $1,447,776.61 NPER 6
Pretax lease payment $1,832,628.62 Borrow 6%
TaxRate 21%
NAL $128,563.07
Asset costs $825,000
Aftertax lease payment $331,800 NPER 3
Aftertax interest rate 4.74% Borrow 7%
Reduction in debt capacity $1,698,208.77 TaxRate 22%

a.
Depreciation tax shield $60,500
PMT $314,181.92 ! AfterTax
Aftertax debt cost 5.46%
NAL $0.00
c.
NAL $0.00
PMT $314,367.62
per year

1.For us this rate must be much greater.

2.For us this rate must be much greater.
per year
a. Machine costs
Year 0 Year 1 Year 2 Year 3 Year 4 NPER
Lease: TaxRate
Lease payment ($640,000) ($640,000) ($640,000) ($640,000) Loan
Tax savings on lease $153,600 $153,600 $153,600 $153,600 Principal
Lost dep. tax shield ($126,000) ($126,000) ($126,000) ($126,000) Interest
Equipment cost $2,100,000 Lease
CFO Incremental $1,613,600 -$612,400 -$612,400 -$612,400 -$126,000

Aftertax discount rate 6.84%

NAL -$94,942.71

b.
NAL $0
PMT $605,604.52
$2,100,000
4
24%
$2,100,000
$525,000
9% on the outstanding balance of the loan at the beginning of each year.
$640,000 per year are due at the beginning.
Asset_Price $745,000
NPER 3
The lessor 6% Borrow
The lessee 9% Borrow
TaxRate 21%

Depreciation tax shield $52,150

Aftertax debt cost 7.11%
NAL $0.00 $372,222.73 PMT_Min_Lessor $294,055.95
NAL $0.00 $372,551.64 PMT_Max_Lessee $294,315.79
Price car $49,500
Other costs $850
Down payment $5,000
Salvage value $28,500 after three years
Money factor 2400
Lease factor 0.00185
NPER 36
Sales tax 7%

APR 4.44%
Net capitalized cost $45,350
Depreciation charge $468.06
Finance charge $136.62
Taxes $42.33
Lease payment $647.01 per month
The annual loan payment will be: $1,298,259.46
Purchase price $4,300,000
Loan 8%
NPER 4
TaxRate 21%
Beginning Interest Principal Ending
Year Total payment
balance payment payment balance
1 $4,300,000.00 $1,298,259.46 $344,000.00 $954,259.46 $3,345,740.54
2 $3,345,740.54 $1,298,259.46 $267,659.24 $1,030,600.22 $2,315,140.32
3 $2,315,140.32 $1,298,259.46 $185,211.23 $1,113,048.23 $1,202,092.09
4 $1,202,092.09 $1,298,259.46 $96,167.37 $1,202,092.09 $0

OCF Total cash flow

1,226,019.46 = -$6,980.54
1,242,051.02 = $9,051.02
1,259,365.10 = $26,365.10
1,278,064.31 = $45,064.31

NAL $58,646.08
a. Cash flows from leasing:
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
Aftertax savings $22,910 $22,910 $22,910 $22,910 $22,910
Lease payment ($80,000) ($80,000) ($80,000) ($80,000) ($80,000)
Tax benefit 16,800 16,800 16,800 16,800 16,800
Net cash flows ($63,200) ($40,290) ($40,290) ($40,290) ($40,290) $22,910

Cash flows from purchasing:

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
Aftertax savings $25,280 $25,280 $25,280 $25,280 $25,280
Purchase ($365,000)
Dep. tax shield $15,330 $15,330 $15,330 $15,330 $15,330
Net cash flows ($365,000) $40,610 $40,610 $40,610 $40,610 $40,610

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5

Lease – Buy $301,800 -$80,900 -$80,900 -$80,900 -$80,900 -$17,700

Aftertax discount rate 7.9%

NAL $21,149.18

c.
PV $280,650.82
Lease $80,000 due at the beginning of each year.
NPER 5
Save $29,000 per year through reductions in electricity costs.
Purchase $365,000
Save $32,000 per year through reductions in electricity costs.
Interest 10% on the remaining balance
Principal $73,000 for five years
D/E 67%
TaxRate 21%
Price equipment $7,930,000
Salavage value $1,020,000
NPER 4
Lease $1,924,000 four annual payments due at the beginning of the year.
Security deposit $520,000
YTM(Cost of debt) 11%
TaxRate 21%

Aftertax salvage value $805,800

Year 0 Year 1 Year 2 Year 3 Year 4

Saved purchase $7,930,000
Lost salvage value ($805,800)
Lost dep. tax shield ($555,044.49) ($740,225.85) ($246,630.93) ($123,398.73)
Security deposit ($520,000) $520,000
Lease payment ($1,924,000) ($1,924,000) ($1,924,000) ($1,924,000)
Tax on lease payment $404,040 $404,040 $404,040 $404,040
Cash flow from leasing $5,890,040 ($2,075,004.49) ($2,260,185.85) ($1,766,590.93) ($409,198.73)

Aftertax cost of debt 8.69%

NAL $398,670.47

Lease $2,307,500
NPER 2
Salavage value $4,200,000
Book value $1,762,046
Aftertax salvage value $3,688,029.66

Year 0 Year 1 Year 2

Saved purchase $7,930,000
Lost salvage value ($3,688,029.66)
Lost dep. tax shield ($555,044.49) ($740,225.85)
Lease payment ($2,307,500) ($2,307,500)
Tax on lease payment $484,575 $484,575
Cash flow from leasing $6,107,075 ($2,377,969) ($4,428,256)

NAL $170,764.01

PV of lease payments $4,386,328.83

3 Years
0.3333
0.4445
0.1481
0.0741