# 24. Leasing and the Internal Rate of Return (S26.6) Reconstruct Table 26.2 as a leveraged lease, assuming

## Question:

24. Leasing and the Internal Rate of Return (S26.6) Reconstruct Table 26.2 as a leveraged lease, assuming that the lessor borrows $80,000, 80% of the cost of the bus, nonrecourse at an interest rate of 11%. All lease payments are devoted to debt service (interest and principal)

until the loan is paid off. Assume that the bus is worth $10,000 at the end of the lease. Calculate after-tax cash flows on the lessor’s equity investment of $20,000. What is the IRR of the equity cash flows? Is there more than one IRR? How would you value the lessor’s equity investment?

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**Related Book For**

## Principles Of Corporate Finance

**ISBN:** 9781264080946

14th Edition

**Authors:** Richard Brealey, Stewart Myers, Franklin Allen, Alex Edmans