price

Annual rate
Number of years
DP
Tax rate

Principal
Beginning of year
1
2
3
4
5
TOTAL

715,000
13.0%
5
34%

$
715,000.00
Beginning balance
Payment
$
$
$
$
$

715,000.00
604,665.10
479,986.67
339,100.03
179,898.14

$
$
$
$
$

Interest
203,284.90
203,284.90
203,284.90
203,284.90
203,284.90

$
$
$
$
$
$

92,950
78,606
62,398
44,083
23,387
301,424.49

Interest after tax

$
$
$
$
$
$

61,347
51,880
41,183
29,095
15,435
198,940.17

Principal

Cumulative Principal

Cumulative Interest

$
$
$
$
$
$

$
$
$
$
$

$
$
$
$
$

110,334.90
124,678.44
140,886.63
159,201.89
179,898.14
715,000.00

110,334.90
235,013.33
375,899.97
535,101.86
715,000.00

92,950.00
171,556.46
233,954.73
278,037.73
301,424.49

Ending balance
$
$
$
$
$

604,665.10
479,986.67
339,100.03
179,898.14
(0.00)

Tax rate
Pretax interest rate
Equipment cost
Lease payment

$
$

Year

0
1
2
3
4
5
TOTAL
NPV

Calculation of Residual Value Cash Flow

Equipment cost
Residual value (%)
Residual value proceeds
Less: tax expense
Residual cash flow

34%
13.00%
715,000
162,350

Interest Payment Principal Payment

after Tax
$
$
$
$
$
$
$

61,347
51,880
41,183
29,095
15,435
198,940

715,000
11.2729%
80,601.24
13,401.78
67,199.46

$
$
$

$
$
$
$
$
$

###
110,335
124,678
140,887
159,202
179,898
715,000

Cost of debt A
Cost of debt B
Cost of debt C
Cost of debt D

6.27%

Five-Year MACRS
Depreciation Rate

Depreciation
before Tax

8.58%
9.50%
13.00%

20.00%
32.00%
19.20%
11.52%
11.52%
94.24%

$
$
$
$
$
$
$

143,000
228,800
137,280
82,368
82,368
673,816

Calculation of Tax Expense

Market value
Less: net book value
Gain on sale
Tax expense

$
$
$
$

80,601
41,184
39,417
13,402

Calculatio of Net Book Value

Equipment cost
$
Depreciation before tax
$
Net book value
$

715,000
673,816
41,184

Depreciation Tax
Savings
$
$
$
$
$
$
$

Residual Cash Loan Cash Outflow

Flow after Tax

(48,620)
(77,792)
(46,675)
(28,005)
(28,005) $
(229,097) $

###

$
$
$
$
$
(67,199) $
(67,199) $
$

123,062
98,767
135,394
160,292
100,129
617,643
484,546

Leasing Option #3
Rate
NPV
IRR
Lease Advantage
Lease Cash
Outflow
$
$
$
$
$
$
$
$
$

107,151
107,151
107,151
107,151
107,151
535,755
457,514.72 rate
27,031.32

Residual Value Cash Flow

8.58%

$
$
$

A
6.27%
476,156.48 $
6.72%
(6,883.00) $
67,199.46

B
8.58%
457,514.72 $
6.72%
27,031.32 $
67,199.46

C
9.50%
682,597.51 $
10.91%
(18,797.64) $
80,601.24

D
13.00%
645,255.42
10.91%
25,997.46
80,601.24

Year

Lease payment
Forgone tax
Forgone residual Initial purchase
after tax
savings associated value after tax
price saved
with depreciation

0
1
2
3
4
5
Total
IRR

$
$
$
$
$
$
$

(107,151)
(107,151)
(107,151)
(107,151)
(107,151)
(535,755)

$
$
$
$
$
$
$

(48,620)
(77,792)
(46,675)
(28,005)
(28,005) $
(229,097) $

(67,199)
(67,199) $

Lease payment less

incremental cash
flow

715,000 $
$
$
$
$
$
715,000 $

607,849
(155,771)
(184,943)
(153,826)
(135,156)
(95,205)
(117,052)
6.72%