Hong Kong Dragon Airlines Limited (B): Lease vs Buy Decision

1. What are the after-tax cash flows relevant to the purchase option and what discount rate should be used for those cash flows?

2. What are the after-tax cash flows relevant to the sales-and-leaseback option and what discount rate should be used for those cash flows?

3. What are the pros and cons of each option given in the case?

4. Which option did you choose? Why? Provide quantitative support.

5. Perform sensitivity analyses to identify the key bets in your decision.