HMT-220 Chapter 23: Own vs. Lease Exercise Equipment if purchased $ 150,000.00 Salvage Value $ 20,000.00 Lease amount per year (5 years) $ 32,000.00 Depreciation exp per year (5 years) $ 26,000.00 Tax Rate 23.00% Discount Rate 4.00% Eastside (for profit) OWN Depreciation-tax savings calculation Year 1 Year 2 Year 3 Year 4 Year 5 Depreciation expense Savings on 23% tax rate Tax savings Purchase Depreciation Salvage Net cash PV tax savings Value flow factor Total Year 1 Year 2

\begin{tabular}{|lrr|} \hline Equipment if purchased & $150,000.00 \\ Salvage Value & $ & 20,000.00 \\ Lease amount per year (5 years) & $ & 32,000.00 \\ Depreciation exp per year (5 years) & $ & 26,000.00 \\ Tax Rate & & 23.00% \\ Discount Rate & 4.00% \\ \hline \end{tabular} Eastside (for profit) OWN Depreciation-tax savings calculation Year 1 Year 2 Year 3 Year 4 Year 5 Depreciation expense Savings on 23% tax rate Tax savings PurchaseDepreciationtaxsavingsSalvageNetcashValueflowfactorTotalPV Year 1 Year 2 Year 3 Year 4 Year 5 Eastside (for profit) LEASE LeasepaymentLeaseExptaxsavingsSalvageValueNetcashflowPVfactor Year 1 Year 2 Year 3 Year 4 Year 5