We showed that risk-free cash flows should be discounted at the aftertax risk-free rate. Because both lease

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We showed that risk-free cash flows should be discounted at the aftertax risk-free rate. Because both lease payments and depreciation tax shields are nearly riskless, all relevant cash flows in the lease–buy decision should be discounted at a rate near this aftertax rate. We use the real-world convention of discounting at the aftertax interest rate on the lessee’s secured debt. LO.1

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Corporate Finance

ISBN: 9780073105901

8th Edition

Authors: Jeffrey Jaffe, Bradford D Jordan

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