Recalculate the value of the lease to Greymare Bus Lines if the company pays no taxes until
Question:
Recalculate the value of the lease to Greymare Bus Lines if the company pays no taxes until year 3. Calculate the lease cash flows by modifying Table 26.2. Remember that the after-tax borrowing rate for periods 1 and 2 differs from the rate for periods 3 through 7.
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Year 6. Cost of new bus Lost depreciation tax shield Lease payment + 100 -2.02 -7.00 -11.20 -6.72 -4.03 -16.9 -4.03 -16.9 - 16.9 -16.9 -16.9 -16.9 - 16.9 Tax shield of lease payment +5.92 -10.98 +5.92 -17.99 +5.92 +89.02 +5.92 +5.92 +5.92 -15.02 +5.92 -15.02 +5.92 - 17.71 Cash flow of lease - 13.00 -22.19
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Related Book For
Principles of Corporate Finance
ISBN: 978-0072869460
7th edition
Authors: Richard A. Brealey, Stewart C. Myers
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