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Analyze the cost of renting, leasing, and purchasing an item of construction equipment under the conditions described. Evaluate total net after-tax cash flow and its

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Analyze the cost of renting, leasing, and purchasing an item of construction equipment under the conditions described. Evaluate total net after-tax cash flow and its present value. General assumptions Income tax rate 25% Tax saving rate 8% Purchase assumption Equipment cost for whole at once payment 165000 Salvage value after 5 years 90000 Yearly depreciation (year 1) 17% Yearly depreciation (year 2) 19% Yearly depreciation (year 3) 20% Yearly depreciation (year 4) 20% Yearly depreciation (year 5) 20% Investment credit (year 1) 10% of equipment cost Cost basis cost less half the investment credit Down payment for equipment 20 % of equipment cost Loan interest (year 1) 12498 Loan interest (year 2) 8018 Loan interest (year 3) 2969 Monthly payment for purchasing (yearl to year 3) 4050 Lease assumption Term of lease (years) 5 Initial payment 5 month in advance Lease payment (monthly) 2000 Rent assumption Rental period (years) 5 Rental rate (monthly) from year 1 2000 Mid-year present worth factors for i = %8; (year 1) 0.96297 Mid-year present worth factors for i = %8; (year 2) 0.89164 Mid-year present worth factors for i =%8: (year 3) 0.82559 Mid-year present worth factors for i = %8; (year 4) 0.76443 Mid-year present worth factors for i == %8: (year 5) 0.70781 Mid-year present worth factors for i=%8: (final year) 0.68058 Purchase Cost (5) Initial Year 1 Year 2 Year 3 Year 4 Year 5 Final Total Payments Resale Tax at resale Tax savings - depreciation Tax savings - interest Investment credit Net Cost Present value of net cost Lease Cost (5) Initial Year 1 Year 2 Year 3 Year 4 Years Final Total Payments Tax savings payments Net cost Present value of net cost Rental Cost (5) Inicial Year 1 Year 2 Year 3 Year 4 Year 5 Final Total Payments Tux savings payments Net cost Present value of net cost

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