Given the lease payments and terms shown in the following table, determine the y
ID: 2640332 • Letter: G
Question
Given the lease payments and terms shown in the following table, determine the yearly after-tax cash outflows for each firm. Assume that lease payments are made at the beginning of each year, that the firm is in the 40% tax bracket, and that no purchase option exists.
Firm
Annual Lease Payment
Term of Lease (Years)
A
$250,000
5
B
$160,000
12
C
$500,000
8
D
$1,000,000
20
E
$25,000
6
Firm
Annual Lease Payment
Term of Lease (Years)
A
$250,000
5
B
$160,000
12
C
$500,000
8
D
$1,000,000
20
E
$25,000
6
Explanation / Answer
Firm Lease Tax saving Net outflow A $ 250,000.00 $ 100,000.00 $ 150,000.00 B $ 160,000.00 $ 64,000.00 $ 96,000.00 C $ 500,000.00 $ 200,000.00 $ 300,000.00 D $ 1,000,000.00 $ 400,000.00 $ 600,000.00 E $ 25,000.00 $ 10,000.00 $ 15,000.00
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