Cash Flows

Salvage value at end of life =

Interest rate on debt =
Tax Rate =
After-tax cost of debt =

15,000,000
5.80%
35%
3.77%

Annual Payment on loan =

Year
Lease Option
Borrow and Buy Option
Lease Payment
Lease Payment (1-t) Interest (1-t) Depreciation (t)
Principal Pmt.
Maint. Exp (1-t) ATCF
1 -$4,750,000 -$3,087,500
$1,885,000
$816,667 $2,181,075
$325,000 -$3,574,408
2 -$4,750,000 -$3,087,500
$1,775,038
$816,667 $2,307,577
$325,000 -$3,590,949
3 -$4,750,000 -$3,087,500
$1,689,381
$816,667 $2,441,417
$325,000 -$3,639,131
4 -$4,750,000 -$3,087,500
$1,598,756
$816,667 $2,583,019
$325,000 -$3,690,108
5 -$4,750,000 -$3,087,500
$1,502,874
$816,667 $2,732,834
$325,000 -$3,744,042
6 -$4,750,000 -$3,087,500
$1,401,431
$816,667 $2,891,338
$325,000 -$3,801,103
7 -$4,750,000 -$3,087,500
$1,294,105
$816,667 $3,059,036
$325,000 -$3,861,474
8 -$4,750,000 -$3,087,500
$1,180,553
$816,667 $3,236,460
$325,000 -$3,925,347
9 -$4,750,000 -$3,087,500
$1,060,416
$816,667 $3,424,175
$325,000 -$3,992,924
10 -$4,750,000 -$3,087,500
$933,311
$816,667 $3,622,777
$325,000 -$4,064,421
11 -$4,750,000 -$3,087,500
$798,833
$816,667 $3,832,898
$325,000 -$4,140,065
12 -$4,750,000 -$3,087,500
$656,556
$816,667 $4,055,206
$325,000 -$4,220,095
13 -$4,750,000 -$3,087,500
$506,027
$816,667 $4,290,408
$325,000 -$4,304,768
14 -$4,750,000 -$3,087,500
$346,767
$816,667 $4,539,252
$325,000 -$4,394,352
15 -$4,750,000 -$3,087,500
$178,270
$816,667 $4,802,528
$325,000 $10,510,869

Page 1

Loan P
Differential CF
$
486,908
$
503,449
$
551,631
$
602,608
$
656,542
$
713,603
$
773,974
$
837,847
$
905,424
$
976,921
$ 1,052,565
$ 1,132,595
$ 1,217,268
$ 1,306,852
##########

Cash Flows

nnual Payment on loan = $ 5,081,075

Loan Payments
Interest
Remaining Principal
$ 2,900,000 $47,818,925
$ 2,773,498 $45,511,348
$ 2,639,658 $43,069,931
$ 2,498,056 $40,486,912
$ 2,348,241 $37,754,078
$ 2,189,737 $34,862,740
$ 2,022,039 $31,803,704
$ 1,844,615 $28,567,244
$ 1,656,900 $25,143,069
$ 1,458,298 $21,520,292
$ 1,248,177 $17,687,394
$ 1,025,869 $13,632,188
$ 790,667 $ 9,341,780
$ 541,823 $ 4,802,528
$ 278,547 $
-

Page 2

Diff Cashflows & NPV

Year
Cash flow from leasing
Cash flow from borrow/buy
Differential Cash Flow
Pre-debt Differential Cash Flow
0
0
0
0
$50,000,000
1
-$3,087,500
-$3,574,408
$486,908
-$4,594,167
2
-$3,087,500
-$3,590,949
$503,449
-$4,577,626
3
-$3,087,500
-$3,639,131
$551,631
-$4,529,444
4
-$3,087,500
-$3,690,108
$602,608
-$4,478,467
5
-$3,087,500
-$3,744,042
$656,542
-$4,424,533
6
-$3,087,500
-$3,801,103
$713,603
-$4,367,472
7
-$3,087,500
-$3,861,474
$773,974
-$4,307,101
8
-$3,087,500
-$3,925,347
$837,847
-$4,243,228
9
-$3,087,500
-$3,992,924
$905,424
-$4,175,651
10
-$3,087,500
-$4,064,421
$976,921
-$4,104,154
11
-$3,087,500
-$4,140,065
$1,052,565
-$4,028,510
12
-$3,087,500
-$4,220,095
$1,132,595
-$3,948,479
13
-$3,087,500
-$4,304,768
$1,217,268
-$3,863,807
14
-$3,087,500
-$4,394,352
$1,306,852
-$3,774,223
15
-$3,087,500
$10,510,869
-$13,598,369
-$18,679,443
NPV ($34,886,756)
($35,650,419)
$763,663
IRR =
5.39%
EAC= $

(3,087,500) $

(3,155,085)

Page 3

NPV with diff rates

Pre-tax interest rate for lease =

6.25%
Pre-tax interest rate for borrowing 5.80%
=
After-tax interest rate on lease = 4.06%
After-tax interest rate on borrowing3.77%
=
Discount rate for salvage value = 8.00%
Year Cash flow from
Cash
leasing
flow from borrow/buy
0
$0
$0
1
-$3,087,500 -$3,574,408
2
-$3,087,500 -$3,590,949
3
-$3,087,500 -$3,639,131
4
-$3,087,500 -$3,690,108
5
-$3,087,500 -$3,744,042
6
-$3,087,500 -$3,801,103
7
-$3,087,500 -$3,861,474
8
-$3,087,500 -$3,925,347
9
-$3,087,500 -$3,992,924
10
-$3,087,500 -$4,064,421
11
-$3,087,500 -$4,140,065
12
-$3,087,500 -$4,220,095
13
-$3,087,500 -$4,304,768
14
-$3,087,500 -$4,394,352
15
-$3,087,500 $10,510,869
NPV=
########### ########## $5,173,432.25

Page 4

Lessor' View

Tax Rate =
Cost of Borrowing =
After-tax cost of debt =
Year
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15

48%
5.20%
2.70%

Annual payment on loan =

Lease Revenue
Depreciation tax Interest
benefitsExpense(1-t)
Principal Repayment
Maintenance Expense (1-t)
After-tax CF
$2,470,000 $1,120,000 $1,352,000 $2,282,454
$260,000
-$304,454
$2,470,000 $1,120,000 $1,290,282 $2,401,142
$260,000
-$361,424
$2,470,000 $1,120,000 $1,225,356 $2,526,001
$260,000
-$421,357
$2,470,000 $1,120,000 $1,157,052 $2,657,353
$260,000
-$484,406
$2,470,000 $1,120,000 $1,085,198 $2,795,536
$260,000
-$550,733
$2,470,000 $1,120,000 $1,009,606 $2,940,904
$260,000
-$620,510
$2,470,000 $1,120,000
$930,084
$3,093,831
$260,000
-$693,915
$2,470,000 $1,120,000
$846,427
$3,254,710
$260,000
-$771,137
$2,470,000 $1,120,000
$758,420
$3,423,955
$260,000
-$852,374
$2,470,000 $1,120,000
$665,836
$3,602,000
$260,000
-$937,836
$2,470,000 $1,120,000
$568,438
$3,789,304
$260,000
-$1,027,742
$2,470,000 $1,120,000
$465,975
$3,986,348
$260,000
-$1,122,323
$2,470,000 $1,120,000
$358,184
$4,193,638
$260,000
-$1,221,823
$2,470,000 $1,120,000
$244,788
$4,411,707
$260,000
-$1,326,496
$2,470,000 $1,120,000
$125,496
$4,641,116
$260,000
$13,563,388
$670,633

Page 5

Lessor' View

Annual payment on loan =

4,882,454

Interest
Principal Repaid Remaining Principal
2,600,000
2,282,454
47,717,546
2,481,312
2,401,142
45,316,404
2,356,453
2,526,001
42,790,403
2,225,101
2,657,353
40,133,049
2,086,919
2,795,536
37,337,513
1,941,551
2,940,904
34,396,610
1,788,624
3,093,831
31,302,779
1,627,745
3,254,710
28,048,069
1,458,500
3,423,955
24,624,115
1,280,454
3,602,000
21,022,114
1,093,150
3,789,304
17,232,810
896,106
3,986,348
13,246,462
688,816
4,193,638
9,052,824
470,747
4,411,707
4,641,116
241,338
4,641,116
0

Page 6