Case: Airplane Leasing Analysisdetermine the after tax and before tax leasing payment

You work as a financial analyst for RBC. Your company is considering buying an airplane and then lease it to Delta Air Lines. Your task is to determine the before tax operating leasing payment

You may follow the Leasing example we discussed in the teaching notes.

You may choose an airplane of your choice (767, 777, 787)

Assume 20 year depreciation period in your lease analysis using the depreciation table in the notes or straight line depreciation method.

Make your assumptions about the following parameters: tax rate,

required rate of return,

insurance cost,

maintenance and operating costs,

and salvage value.

(Please use Google Search to help you with the airplane price, expenses, maintenance cost, insurance cost, and depreciation value.)

You final report will be in a word document, not the excel file. You may copy and paste the excel calculation (or take a photo shot and include it) in the word file. You may also follow my example document to present your calculations. Finally, you want to include the following in your report:

1. Description of your airplane

2. Explanation of your assumption of the parameters such as tax rate, required rate of return, ...

3. Explanation of your calculation of after tax leasing payment

4. your final calculation of before tax break even leasing payment.

There is no requirement for the length of the report. Make sure your report is clear and to the point. In other words, there is no minimum requirement for number of pages or lengths for the report.

Note: (1) Follow the notes on Break Even Rent Example for reference (2) Refer to "How to Find numbers for airplane leasing break even payment analysis.docx" for help to collect the data

1. Depreciation (assume 20 year schedule)

Year	20 years
1	3.75%
2	7.22%
3	6.68%
4	6.18%
5	5.71%
6	5.29%
7	4.89%
8	4.52%
9	4.46%
10	4.46%
11	4.46%
12	4.46%
13	4.46%
14	4.46%
15	4.46%
16	4.46%
17	4.46%
18	4.46%
19	4.46%
20	4.46%
21	2.23%

1. Salvage value

Assume 10% of the initial valueafter 25 years of services

1) Buying of the equipment: -357 million 2 Maint.,Ins, and Selling cost will add to the cost: Using the number found from Google search: Operating Cost=Operating cost per hour*Hours per year=$24,000*500=12000000 Insurance cost=Insurance per trip*number of trip per year=$2175*50=108750

Total Cost=12108750