Please solve all the answers only for number 2

Your boss is seeking your technical advice as she contemplates the acquisition of an asset costing $3,000,000. She plans to pay $900,000 as a down payment and finance the balance on a 5-year, 7% note. The note will result in five equal principle annual payments of $420,000 due on December 31 of each year. NOTE: The cash payments on the loan will vary annually since the actual payments will include both principle and interest amounts.

The asset is assumed to have a 10-year life but we will use it for five years with a $500,000 salvage value at the end of five years. Assume we will sell the asset at the end of year five for $500,000. The boss prefers that depreciation be straight-line in a manner consistent with the other company assets.

The tax rate is 30% and the boss has an expected (hurdle) rate of return of 20%.

Assume all revenues and expenses from the asset involve cash receipts and cash payments.

The following schedule depicts the expected earnings (before interest, taxes and depreciation).

Yr 1	Yr 2	Yr 3	Yr 4	Yr 5
$2,200,000	$2,300,000	$2,240,000	$2,180,000	$2,120,000		Revenues
($670,000)	($680,000)	($710,000)	($670,000)	($640,000)		Less: COGS
$1,530,000	$1,620,000	$1,530,000	$1,510,000	$1,480,000		GrossProfit
($680,000)	($800,000)	($760,000)	($760,000)	($720,000)		Less:OpExp
$850,000	$820,000	$770,000	$750,000	760,000		EBITDA
					(Operating Income)

Required: (show all work)

Using Excel, prepare in good order, each of the following requirements. Create and label each tab and be certain that each tab fits a printable page.

1a. Prepare the amortization table for the five-year note.

b. Prepare the depreciation schedule for the asset.

c. Prepare the income statement for each of the five years (for the purposes of calculating the taxes).

d. Prepare the cash flows provided by the asset for each of the 5 years.

e. Calculate the present value of the cash flows.

f. Evaluate if this acquisition is feasible. Explain and substantiate your answer with calculation.

2. Assume an investment group has proposed to acquire the asset, then lease it to your boss in exchange for a five-year lease involving five $743,062 annual payments, the first due at origination and every January 1 thereafter. The investment group seeks to make 12% on their money. The asset will be signed over to your boss at lease end. Assume earnings are identical to those shown above.

Determine the impact this choice will have on the decision process. (Start by preparing the lease amortization table in a manner similar to step a above). Follow the steps b-f shown above for this financing alternative.