Loser Inc, which is losing money and is in urgent need of cash, is considering selling its entire

fleet of trucks and leasing them back. Leasing Capital has offered to buy the trucks for $$50$ million $($which is

their estimated market value$)$ and lease them back to the firm for an annual cost of $$4$ million. The book

value of the trucks is also $$50$ million, and they can be depreciated straight$-$line over the next $10$ years to

a salvage value of $$10$ million. Loser Inc has a pretax cost of debt of $10\%$ and does not expect tohave taxable

income in the foreseeable future,$]$

a$.$ Should Loser Inc do the sale and leaseback?

b$.$ Now consider the lease from the viewpoint of Leasing Capital, which has a pretax opportunity cost of $7\%$ and

faces a corporate tax rate of $40\%.$

i$.$ Should it agree to buy the trucks and lease them back?

ii$.$ How is it possible for both Leasing Capital and Loser Inc store to gain from the lease?