7. Evaluation by the lessor Both the lessee and the lessor conduct an analysis to evaluate if the potential lease agreement will be mutually beneficial or not. Suppose you work as a leasing manager at a professional leasing company and you're working on a deal where the equipment to be leased requires an initial outlay of $40,000 with a lease term of four years. You will be depreciating the equipment on a straight-line basis with an amount of $10,000 per year down to a salvage value of $0. However, the actual salvage value of the equipment is expected to be $8,000 at the end of the lease term. In your analysis you'll treati the salvage value as a recapture of the depreciation and tax it at a marginal rate of 30%. Your company expects an after- tax rate of return of 11% in all deal evaluations. As a leasing manager you would conduct a three-step process in your analysis. Complete the different elements involved in the analysis. Step 1: Calculate the amount to be amortized in the deal. Note: Round your Present value answers to two decimals places and amortized amount to whole number. $40,000 Amortization Amount Calculations Initial Outlay Less: Present value of after-tax salvage Less: Present value of depreciation tax shelter Amount to be amortized Step 2: Calculate the after-tax lease income requirement considering that lease payments are made in the beginning of the year. The annual after-tax lease income to the lessor is Step 3: Calculate before-tax lease payment to be made by the lessee. The lease payment required from the lessee is