Recalculate the value of the lease to Greenfield Construction if the company pays no taxes until year 3. Calculate the lease cash flows by modifying Table 17.1. Remember that the after-tax borrowing rate for years l and 2 differs from the rate for years 3 through 7.

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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