Look again at the backhoe-loader lease described in Table 17.1. Consider each question separately.

a. What is the value of the lease if Greenfield's tax rate is 20%?
b. What would the lease value be if Greenfield's first CCA deduction was taken at the end of year 1? Use the formula approach to calculate the value of leasing.
c. What would the lease value be if Greenfield had many other assets in the equipment asset pool? In this case, the equipment asset pool would not be closed.

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Year Lease Cash Flows Saved cost of a new backhoe loader Lost CCA tax shield (calculated below) Lease payment Lease payment tax shield Cash flow of lease Tax Shield Calculation +100,000 8,925 3,061 6,248 1,500 5,250 - 4.373 2,143 -3,500 18,500 -18,500 - 18,500 -18,500 -18,500 -18,500 -18,500 + 6,475 82,725 + 6,475 + 6,475 - 16,398 + 6,475 - 15,086 + 6,475 + 6,475 + 6,475 14,168 -20,950 13,525 -3,500 -18,273 000'0OL 85,000 20,409 14,286 29,155 59.500 UCC 41,650 10,000 CCA (CCA rate = 30%)" 8,747 6,123 25.500 4,286 12,495 17,850 15,000 CCA tax shield (tax rate = 35%)* 8,925 6,248 4,373 5,250 3,061 1,500 2,143 3.500