CHECK TABLE BELOW I CAN NOT GET RIGHT THE ONE WITH QUESTION MARK table mso displayed decimal separator mso displayed thousand separator , tr mso height source auto col mso width source auto td padding top 1px padding right 1px padding left 1px mso ignore padding color black font size 11 0pt font weight 400 font style normal text decoration none font family Calibri, sans serif mso font charset 0 text align general vertical align bottom border none white space nowrap mso rotate 0 xl16 font size 10 0pt font family Arial, sans serif mso font charset 0 xl17 font size 10 0pt font weight 700 font family Arial, sans serif mso font charset 0 xl20 font size 10 0pt font style italic font family Arial, sans serif mso font charset 0 xl21 font size 10 0pt font family Arial, sans serif mso font charset 0 text align center border top none border right none border bottom 5pt solid windowtext border left none xl22 font size 10 0pt font weight 700 font style italic font family Arial, sans serif mso font charset 0 xl23 color windowtext font size 10 0pt font family Arial, sans serif mso font charset 0 xl25 color windowtext font size 10 0pt font family Arial, sans serif mso font charset 0 text align right xl29 font size 10 0pt font family Arial, sans serif mso font charset 0 text align center xl30 font size 10 0pt font weight 700 font family Arial, sans serif mso font charset 0 text align center border top none border right none border bottom 5pt solid windowtext border left none xl33 font size 10 0pt font family Arial, sans serif mso font charset 0 border top 5pt solid windowtext border right none border bottom 2 0pt double windowtext border left none xl36 font size 10 0pt font family Arial, sans serif mso font charset 0 background FF9933 mso pattern black none xl40 font size 10 0pt font family Arial, sans serif mso font charset 0 text align right background FF9933 mso pattern black none xl41 font size 10 0pt font family Arial, sans serif mso font charset 204 xl43 font size 10 0pt font family Arial, sans serif mso font charset 0 text align right background 92D050 mso pattern black none xl45 font size 10 0pt font family Arial, sans serif mso font charset 0 background 8EA9DB mso pattern black none xl46 font size 10 0pt font family Arial, sans serif mso font charset 0 text align right xl48 font size 10 0pt font family Arial, sans serif mso font charset 0 background 92D050 mso pattern black none Lease versus Buy Cost of machinery $1,000,000 Bank loan amount as of cost 100 00 MACRS Depreciation Rates Year 1 Year 2 Year 3 Year 4 33 33 44 45 14 81 7 41 Estimated annual maintenance expenses $46,000 Length of lease term (in years) 3 Annual end of year lease payments $280,000 Lessee pays for insurance, property taxes, and maintenance Yes Machinery fair market value at Year 3 $230,000 Firm's tax rate 39 00 Bank loan rate 14 00 Length of loan term (in years) for annual end of year payments 6 Borrow and Buy Analysis Depreciation Schedule of New Machinery Year 1 Year 2 Year 3 Year 4 Depreciation expense $333,300 $444,500 $148,100 $74,100 Book value of new machinery $666,700 $222,200 $74,100 $0 Amortization Schedule of Loan Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Beginning loan balance $1,000,000 $882,843 $749,283 $597,025 $423,451 $225,577 Loan payment 257,157 257,157 257,157 257,157 257,157 257,157 Interest payment 140,000 123,598 104,900 83,584 59,283 31,581 Principal payment 117,157 133,560 152,258 173,574 197,874 225,577 Ending loan balance 882,843 749,283 597,025 423,451 225,577 0 Cost of Owning Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Purchase price of machinery $1,000,000 Loan proceeds $1,000,000 Loan payments 257,157 257,157 257,157 257,157 257,157 257,157 Interest tax savings 54,600 48,203 40,911 32,598 23,120 12,316 Depreciation tax savings 129,987 173,355 57,759 28,899 0 0 Net cash flow $0 $72,570 $35,599 $158,488 $195,661 $234,037 $244,841 PV of ownership Depreciation Schedule of Used Machinery Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Depreciation expense $76,659 $102,235 $34,063 $17,043 Book value of used machinery 153,341 51,106 17,043 0 Cost of Leasing Machinery Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 After tax lease payment $170,800 $170,800 $170,800 Fair market value of machinery 230,000 Depreciation tax savings 29,897 39,872 13,285 6,647 Net cash flow $0 $170,800 $170,800 $370,903 $39,872 $13,285 $6,647 PV of leasing Net advantage of leasing Should the firm lease the machinery Formulas Borrow and Buy Analysis Depreciation Schedule of New Machinery Year 1 Year 2 Year 3 Year 4 Depreciation expense B3 C7 B3 D7 B3 E7 B3 F7 Book value of new machinery Amortization Schedule of Loan Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Beginning loan balance Loan payment PMT(B15,B16, B3,0) Interest payment C24 B15 D24 B15 E24 B15 F24 B15 G24 B15 H24 B15 Principal payment C25 C26 D25 D26 E25 E26 F25 F26 G25 G26 H25 H26 Ending loan balance C24 C27 D24 D27 E24 E27 F24 F27 G24 G27 H24 H27 Cost of Owning Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Purchase price of machinery B3 Loan proceeds B3 Loan payments C25 Interest tax savings C26 $B$14 D26 $B$14 E26 $B$14 F26 $B$14 G26 $B$14 H26 $B$14 Depreciation tax savings C20 $B$14 D20 $B$14 E20 $B$14 F20 $B$14 G20 $B$14 H20 $B$14 Net cash flow PV of ownership N A Depreciation Schedule of Used Machinery Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Depreciation expense C7 $B$13 D7 $B$13 E7 $B$13 F7 $B$13 Book value of used machinery Cost of Leasing Machinery Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 After tax lease payment (B11 (B11 B14)) Fair market value of machinery B13 Depreciation tax savings E42 $B$14 F42 $B$14 G42 $B$14 H42 $B$14 Net cash flow PV of leasing N A Net advantage of leasing N A Should the firm lease the machinery N A

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Question: CHECK TABLE BELOW....I CAN NOT GET RIGHT THE ONE WITH QUESTION MARK. table {mso-displayed-decimal-separator:.; mso-displayed-thousand-separator:,;} tr {mso-height-source:auto;} col {mso-width-source:auto;} td {padding-top:1px; padding-right:1px; padding-left:1px; mso-ignore:padding; color:black;

CHECK TABLE BELOW....I CAN NOT GET RIGHT THE ONE WITH QUESTION MARK.

table {mso-displayed-decimal-separator:"\."; mso-displayed-thousand-separator:"\,";} tr {mso-height-source:auto;} col {mso-width-source:auto;} td {padding-top:1px; padding-right:1px; padding-left:1px; mso-ignore:padding; color:black; font-size:11.0pt; font-weight:400; font-style:normal; text-decoration:none; font-family:Calibri, sans-serif; mso-font-charset:0; text-align:general; vertical-align:bottom; border:none; white-space:nowrap; mso-rotate:0;} .xl16 {font-size:10.0pt; font-family:Arial, sans-serif; mso-font-charset:0;} .xl17 {font-size:10.0pt; font-weight:700; font-family:Arial, sans-serif; mso-font-charset:0;} .xl20 {font-size:10.0pt; font-style:italic; font-family:Arial, sans-serif; mso-font-charset:0;} .xl21 {font-size:10.0pt; font-family:Arial, sans-serif; mso-font-charset:0; text-align:center; border-top:none; border-right:none; border-bottom:.5pt solid windowtext; border-left:none;} .xl22 {font-size:10.0pt; font-weight:700; font-style:italic; font-family:Arial, sans-serif; mso-font-charset:0;} .xl23 {color:windowtext; font-size:10.0pt; font-family:Arial, sans-serif; mso-font-charset:0;} .xl25 {color:windowtext; font-size:10.0pt; font-family:Arial, sans-serif; mso-font-charset:0; text-align:right;} .xl29 {font-size:10.0pt; font-family:Arial, sans-serif; mso-font-charset:0; text-align:center;} .xl30 {font-size:10.0pt; font-weight:700; font-family:Arial, sans-serif; mso-font-charset:0; text-align:center; border-top:none; border-right:none; border-bottom:.5pt solid windowtext; border-left:none;} .xl33 {font-size:10.0pt; font-family:Arial, sans-serif; mso-font-charset:0; border-top:.5pt solid windowtext; border-right:none; border-bottom:2.0pt double windowtext; border-left:none;} .xl36 {font-size:10.0pt; font-family:Arial, sans-serif; mso-font-charset:0; background:#FF9933; mso-pattern:black none;} .xl40 {font-size:10.0pt; font-family:Arial, sans-serif; mso-font-charset:0; text-align:right; background:#FF9933; mso-pattern:black none;} .xl41 {font-size:10.0pt; font-family:Arial, sans-serif; mso-font-charset:204;} .xl43 {font-size:10.0pt; font-family:Arial, sans-serif; mso-font-charset:0; text-align:right; background:#92D050; mso-pattern:black none;} .xl45 {font-size:10.0pt; font-family:Arial, sans-serif; mso-font-charset:0; background:#8EA9DB; mso-pattern:black none;} .xl46 {font-size:10.0pt; font-family:Arial, sans-serif; mso-font-charset:0; text-align:right;} .xl48 {font-size:10.0pt; font-family:Arial, sans-serif; mso-font-charset:0; background:#92D050; mso-pattern:black none;}

Lease versus Buy

Cost of machinery	$1,000,000
Bank loan amount as % of cost	100.00%

MACRS Depreciation Rates:		Year 1	Year 2	Year 3	Year 4
		33.33%	44.45%	14.81%	7.41%

Estimated annual maintenance expenses	$46,000
Length of lease term (in years)	3
Annual end-of-year lease payments	$280,000
Lessee pays for insurance, property taxes, and maintenance	Yes
Machinery fair market value at Year 3	$230,000
Firm's tax rate	39.00%
Bank loan rate	14.00%
Length of loan term (in years) for annual end-of-year payments	6

Borrow and Buy Analysis:
Depreciation Schedule of New Machinery:		Year 1	Year 2	Year 3	Year 4
Depreciation expense		$333,300	$444,500	$148,100	$74,100
Book value of new machinery		$666,700	$222,200	$74,100	$0

Amortization Schedule of Loan:		Year 1	Year 2	Year 3	Year 4	Year 5	Year 6
Beginning loan balance		$1,000,000	$882,843	$749,283	$597,025	$423,451	$225,577
Loan payment		257,157	257,157	257,157	257,157	257,157	257,157
Interest payment		140,000	123,598	104,900	83,584	59,283	31,581
Principal payment		117,157	133,560	152,258	173,574	197,874	225,577
Ending loan balance		882,843	749,283	597,025	423,451	225,577	0

Cost of Owning:	Year 0	Year 1	Year 2	Year 3	Year 4	Year 5	Year 6
Purchase price of machinery	-$1,000,000
Loan proceeds	$1,000,000
Loan payments		-257,157	-257,157	-257,157	-257,157	-257,157	-257,157
Interest tax savings		54,600	48,203	40,911	32,598	23,120	12,316
Depreciation tax savings		129,987	173,355	57,759	28,899	0	0
Net cash flow	$0	-$72,570	-$35,599	-$158,488	-$195,661	-$234,037	-$244,841

PV of ownership	????


Depreciation Schedule of Used Machinery:	Year 0	Year 1	Year 2	Year 3	Year 4	Year 5	Year 6
Depreciation expense				$76,659	$102,235	$34,063	$17,043
Book value of used machinery				153,341	51,106	17,043	0


Cost of Leasing Machinery:	Year 0	Year 1	Year 2	Year 3	Year 4	Year 5	Year 6
After-tax lease payment		-$170,800	-$170,800	-$170,800
Fair market value of machinery				-230,000
Depreciation tax savings				29,897	39,872	13,285	6,647
Net cash flow	$0	-$170,800	-$170,800	-$370,903	$39,872	$13,285	$6,647

PV of leasing	????

Net advantage of leasing	????

Should the firm lease the machinery?	????

Formulas
Borrow and Buy Analysis:
Depreciation Schedule of New Machinery:		Year 1	Year 2	Year 3	Year 4
Depreciation expense		=B3*C7	=B3*D7	=B3*E7	=B3*F7
Book value of new machinery

Amortization Schedule of Loan:		Year 1	Year 2	Year 3	Year 4	Year 5	Year 6
Beginning loan balance
Loan payment		=PMT(B15,B16,-B3,0)
Interest payment		=C24*B15	=D24*B15	=E24*B15	=F24*B15	=G24*B15	=H24*B15
Principal payment		=C25-C26	=D25-D26	=E25-E26	=F25-F26	=G25-G26	=H25-H26
Ending loan balance		=C24-C27	=D24-D27	=E24-E27	=F24-F27	=G24-G27	=H24-H27

Cost of Owning:	Year 0	Year 1	Year 2	Year 3	Year 4	Year 5	Year 6
Purchase price of machinery	=-B3
Loan proceeds	=B3
Loan payments		=-C25
Interest tax savings		=C26*$B$14	=D26*$B$14	=E26*$B$14	=F26*$B$14	=G26*$B$14	=H26*$B$14
Depreciation tax savings		=C20*$B$14	=D20*$B$14	=E20*$B$14	=F20*$B$14	=G20*$B$14	=H20*$B$14
Net cash flow

PV of ownership	#N/A


Depreciation Schedule of Used Machinery:	Year 0	Year 1	Year 2	Year 3	Year 4	Year 5	Year 6
Depreciation expense				=C7*$B$13	=D7*$B$13	=E7*$B$13	=F7*$B$13
Book value of used machinery


Cost of Leasing Machinery:	Year 0	Year 1	Year 2	Year 3	Year 4	Year 5	Year 6
After-tax lease payment		=-(B11-(B11*B14))
Fair market value of machinery				=-B13
Depreciation tax savings				=E42*$B$14	=F42*$B$14	=G42*$B$14	=H42*$B$14
Net cash flow

PV of leasing	#N/A

Net advantage of leasing	#N/A

Should the firm lease the machinery?	#N/A

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