1. Firm A leases a widget machine, and pays $4,000 per year at the start of each year for the use of the machine. The lease contract is for five years, the after-tax discount rate is 8%, and the tax rate is 40%. What is the PV of the after-tax lease payments? a) $9,582.5 b) $10,349.1 c) $15,970.8 d) $17,248.5 e) None of the above

PMT = (*4000*.6 = 2400), N = 5, r = 8%, Annuity due = 10,349.1

( I see the answer but I am not sure where the 0.6% comes from, are you able to please show where each number is extracted from and the formula walk through so we can see how we came upon the answer? )

2. The PV of after-tax lease payments is $123,000, based on N=10 years, a corporate tax rate of 50%, and an after-tax cost of debt of 10%, what is the before-tax annual lease payment. a) $20,017.68 b) $40,035.36 c) $15,929.06 d) $31,858.12 e) decrease as the firm uses debt to fund expansion projects

PMT based on PV = 123,000, N=10, and r =.10, PMT = 20017.68, PMT(BT) = 20,017.68/(1-.5) = $40,035.36

( I see the answer but I am not sure what the full formula workflow was, are you able to please show where each number was extracted from and the formula! )