Please nterpretation this table about Buy vs Lease

Key Questions: 1. Leasing the auto racks from Norwest Equipment Finance, a 15-year leveraged lease with an option to purchase the racks at the end of the lease 2. Purchasing the $22 million auto racks directly with extemal debt From Burlington Northern Railroad Company point of view Summary of Lease-vs-Buy Scenario on BNRR Loan ("Buy-and-Borrow") Borrow and Buy 15-year term loar Loan Amortization Table Tax Rate (@AMT) 20.00% Equipment Cost 22,068 Payment in arrears In USD 000 Year 2 8 10 11 12 13 14 15 Borrowing rate 9.81% Lease Payment Equipment Cost 22,068 Beginning Balance 22,068 Interest Depr. Loan Year Payment after Principal 14 - Year Depr. Before Depr. Tax Cash Down Payment Annual Payment 22,068 Payment Rate Tax Savings Cash Outflow Loan Amount thru issuance of Bond 22,068 Interest Before Tax @ 9.81% 2,165 2,165 2,165 2 2,165 2,165 2,165 2,165 2,165 2,165 2,165 2,165 2,165 2,165 2,165 Borrowing rate 9.8% 1,732 7.14% 1,5/6 (315) 1,41 Principal due at maturity 22,068 Tax Rate (@AMT) 20.00% 1,732 7.14% 1,576 (315) 1,417 nterest After Tax 1,732 1,732 1,732 1,732 1,732 1,732 1,732 1,732 1,732 1,732 1,732 1,732 1,732 1,732 1,732 1,732 7.14% ,57 (315 1,417 Depreciation 14-years straight line 1,732 7.14% 1,576 (315 1,417 1,732 7.14% 1,576 (315) 1,417 1,732 7.14% 1,576 (315) 1,417 Lease Annual Payments 1,732 7.14% 1,576 (315 1,417 15-Year Lease (In Advance) 1,732 7.14% 1,916 (315) 1,417 Year 1-7 2,300 1,732 7.14% 1,576 (315) 1,417 Year 8-15 2,800 10 1,732 7.14% 1,576 (315) 1,417 Guaranteed Residual Value: 9,200 11 1,732 7.14% 1 576 (315) 1,417 Required by Primus Equipment Finance Division) 12 1,732 7.14% 1,576 (315 1,417 13 1,732 7.14% 1,576 (315) 1,417 AMT Tax Rate - BNRR 20% 14 1,732 7.14% 1.576 (315) 1,417 Marginal Tax Rate 34% 1,732 22,06 0.00% 23,799 |Sum 25.978 22,068 100.00% 22,068 (4,414) 43,632 Memo: Calculation of Residual Value Cash Flow NPV 16,392 Equipment Cost 22,068 Residual Value (%) 41.7% Residual Value Proceeds 9,200 WACC of Burlington 11.38% Leasing - Levera Lease without residual value Lease Amortization Table Year 2 3 5 10 11 12 13 14 15 Sum Beginning Balance Annual lease Payment 2,300 2,300 2,300 2,300 2,300 2,300 2,300 2,800 2,800 2,800 2,800 2,800 2,800 2,800 2,800 38,500 Tax Rate (@AMT) 20.00% Payment after Tax 1,840 1,840 1,840 1,840 1,840 1,840 1,840 2,240 2,240 2,240 2,240 2,240 2,240 2,240 2,240 30,80 Residual value Net Cash Flow lease 1,840 1,840 1,840 1,840 1,840 1,840 1,840 2,240 2,240 2,24 2,240 2,240 2,240 2,240 2.240 30,800 NPV 13,912 Lease with residual value as predefined value : $9.2M Lease Amortization Table Year 10 11 12 13 14 15 Sum Beginning Balance Annual Payment 2,300 2,300 2,300 2,300 2,300 2,300 2,300 * 2,800 2,800 2,800 2,800 2,800 2,800 2,800 2,800 38,500 Tax Rate (@AMT) 20.00% Payment after Tax 1,840 1,840 1,840 1,840 1,840 1,840 1,840 2,240 2,240 2,240 2,240 2,240 2,240 2,24 30,800 Residual value 7,360 7,360 Net Cash Flow lease 1,840 1,840 1,840 1,840 1,840 1.840 1,840 2,240 2,240 2,240 2,240 2,240 2,240 2,240 9,60 38,160 15,373