25-8. Please see that attached. I need the answers and associated excel formulas. Thank you.

Problem 25-8 Suppose Clorox can lease a new computer data processing system for $975,000 per year for for $4.25 million. Assume Clorox has a borrowing cost of 7% and a tax rate of 35%, and the a. If Clorox will depreciate the computer equipment on a straight-line basis over the nex lease, is it better to lease or finance the purchase of the equipment? b. Suppose that if Clorox buys the equipment, it will use accelerated depreciation for tax of the purchase price immediately and can take depreciation deductions equal to 32% price over the next five years. Compare leasing with purchase in this case. Tax rate Borrowing Rate 35.00% 7.00% Life of asset After-tax borrowing rate Year 0 1 Lease Lease payment Income tax savings Free cash flow (Lease) -$975,000 -$975,000 a. If Clorox will depreciate the computer equipment on a straight-line basis over the nex lease, is it better to lease or finance the purchase of the equipment? Year 0 Buy Capital expenditure Depreciation Depreciation tax shield Free cash flow (Buy) FCF Lease - FCF Buy NPV of difference -$4,250,000 1 Decision: b. Suppose that if Clorox buys the equipment, it will use accelerated depreciation for tax of the purchase price immediately and can take depreciation deductions equal to 32% price over the next five years. Compare leasing with purchase in this case. Depreciation rate Year 20.00% 0 32.00% 1 Buy Capital expenditure Depreciation Depreciation tax shield Free cash flow (Buy) -$4,250,000 FCF Lease - FCF Buy NPV of difference Decision: Requirements 1. In cell F11, by using cell references, calculate the after-tax borrowing rate (1 pt.). 2. You will first calculate the free cash flows of the leasing alternative. In cell F16, by using relative and absolute cell references, calculate the income tax sa G16:K16 (1 pt.). 3. In cell F17, by using cell references, calculate the free cash flow for year 0 (1 pt.). Co 4. You will now calculate the free cash flows of the purchase alternative under the assum In cell G24, by using relative and absolute cell references, calculate the depreciation onto cells H24:K24 (1 pt.). 5. In cell G25, by using relative and absolute cell references, calculate the depreciation it onto cells H25:K25 (1 pt.). 6. In cell F26, by using cell references, calculate the free cash flow for year 0 (1 pt.). 7. In cell G26, by using cell references, calculate the free cash flow for year 1 (1 pt.). C 8. In cell F28, by using cell references, calculate the incremental free cash flows (1 pt.) 9. To calculate the net present value of the incremental free cash flows, you will use the NPV cell references, calculate the net present value of the incremental free cash flow 10. In cell E32, type either Lease or Purchase (1 pt.). 11. You will now calculate the free cash flows of the purchase alternative under the assum In cell F40, by using relative and absolute cell references, calculate the depreciation e onto cells G40:K40 (1 pt.). 12. In cell F41, by using relative and absolute cell references, calculate the depreciation t it onto cells G41:K41 (1 pt.). 13. In cell F42, by using cell references, calculate the free cash flow for year 0 (1 pt.). 14. In cell G42, by using cell references, calculate the free cash flow for year 1 (1 pt.). C 15. In cell F44, by using cell references, calculate the incremental free cash flows (1 pt.) pt.). 16. To calculate the net present value of the incremental free cash flows, you will use the NPV cell references, calculate the net present value of the incremental free cash flow 17. In cell E48, type either Lease or Purchase (1 pt.). $975,000 per year for five years. Alternatively, it can purchase the system x rate of 35%, and the system will be obsolete at the end of five years. line basis over the next five years, and if the lease qualifies as a true tax ent? ed depreciation for tax purposes. Specifically, suppose it can expense 20% ductions equal to 32%, 19.2%, 11.52%, 11.52%, and 5.76% of the purchase n this case. 5 2 -$975,000 3 -$975,000 4 5 -$975,000 $0 line basis over the next five years, and if the lease qualifies as a true tax ent? 2 3 4 5 ed depreciation for tax purposes. Specifically, suppose it can expense 20% ductions equal to 32%, 19.2%, 11.52%, 11.52%, and 5.76% of the purchase n this case. 19.20% 2 11.52% 3 11.52% 4 5.76% 5 owing rate (1 pt.). tive. late the income tax savings (1 pt.). Copy cell F16 and paste it onto cells w for year 0 (1 pt.). Copy cell F17 and paste it onto cells G17:K17 (1 pt.). native under the assumption of a straight-line depreciation. ulate the depreciation expense for year 1 (1 pt.). Copy cell G24 and paste it ulate the depreciation tax shield for year 1 (1 pt.). Copy cell G25 and paste w for year 0 (1 pt.). w for year 1 (1 pt.). Copy cell G26 and paste it onto cells H26:K26 (1 pt.). ree cash flows (1 pt.). Copy and paste cell F28 onto cells G28:K28 (1 pt.). ows, you will use the function NPV. In cell F30, by using the function mental free cash flows (1 pt.). native under the assumption of accelerated depreciation. late the depreciation expense for year 0 (1 pt.). Copy cell F40 and paste it late the depreciation tax shield for year 0 (1 pt.). Copy cell F41 and paste w for year 0 (1 pt.). w for year 1 (1 pt.). Copy cell G42 and paste it onto cells H42:K42 (1 pt.). ree cash flows (1 pt.). Copy cell F44 and paste it onto cells G44:K44 (1 ows, you will use the function NPV. In cell F46, by using the function mental free cash flows (1 pt.)