1 Financial Management 2 Leasing Data 6 Purchase price, S 7 Machine 8 Life, year
ID: 2418010 • Letter: 1
Question
1 Financial Management 2 Leasing Data 6 Purchase price, S 7 Machine 8 Life, years 9 Depreciation 1,000,000 MACRS Property class, years 12 Convention half-year 13 Additional (Bonus $179 14 Tax rate 15 Federal 16 State 17 End-of-lease options 18 Purchase price 19Fair-market, S 20 Purchase option amount 21 Selling price 22 Fair-market 23 Adm cost of selling 24 Other fees and deposits -35%) 5%) 310,010-110 26 Paid by lessee 27 Upfront one-time, S 28 Paid by owner (buyer) 29 Upfront one-time, S 30 Lease 12,500 6,250 5,000 31 Tax lease 32 Life, years TRUE 33 Frequency p.a. 12 60 No. of payments, total 35 Growth rate 36 First 30 payment periods 8.0529%) 0.6711%Explanation / Answer
to calculate the NPV from lessor point of view
the details on which the NPV will be calculated is given below
1) The cost of capital will be 7.85% and discount rate factor after asjusting tax rate of 40% will be 7.85% x (1-0.4) is 4.71
2) the tax rate will be 40% inclusive of federal and state
3) The equipment cost is $ 3,10,000
4) The depreciation is calculated for 5 years under MARCS half yearly convention
5) the machine life is 5 years
6) The lease revenue on yearly basis is given below
The calculation of NPV of lessor
The net cash flow is $ 264,930 to the lessor
The security deposit is $ 12,500 received in advance and returned after 5 years then the Present value of $12,500 x 0.79 ( discount factor) is $ 9,875 in all the lessor wil earn $ 2,625 on security deposit
to calculate the NPV from lessor point of view
the details on which the NPV will be calculated is given below
1) The cost of capital will be 7.85% and discount rate factor after asjusting tax rate of 40% will be 7.85% x (1-0.4) is 4.71
2) the tax rate will be 40% inclusive of federal and state
3) The equipment cost is $ 3,10,000
4) The depreciation is calculated for 5 years under MARCS half yearly convention
5) the machine life is 5 years
6) The lease revenue on yearly basis is given below
year lease amount received on monthy basis months Total amount tax @ 40% After tax lease income 1 13263 12 159156 63662.4 95493.6 2 13263 12 159156 63662.4 95493.6 3 13263 6 79578 31831.2 47746.8 16210 6 97260 38904 58356 176838 70735.2 106102.8 4 16210 12 194520 77808 116712 5 16210 12 194520 77808 116712The calculation of NPV of lessor
NPV calculation to lessor Year Equipment cost Depreciation Depreciaton tax shield ($) @ 40% After tax lease income After tax cash flows($) present value factor @ 4.71% after tax cash flows (present values) $ rate amount 0 -310000 20% 62000 24800 -285200 1 -285200 1 32% 99200 39680 95493.6 135173.6 0.955019 129093.3 2 19.20% 59520 23808 95493.6 119301.6 0.912061 108810.3 3 11.52% 35712 14284.8 106102.8 120387.6 0.871035 104861.8 4 11.52% 35712 14284.8 116712 130996.8 0.831854 108970.3 5 5.76% 17856 7142.4 116712 123854.4 0.794437 98394.46 264930.1Related Questions
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