Suppose BMI Regional is considering the purchase of new airplanes to facilitate operation of new routes. In total, it plans to purchase a new airline fleet for $5.0 million. This fleet will qualify for accelerated depreciation: 20% can be expensed immediately, followed by 32%, 19.2%, 11.52%, 11.52%, and 5.76% over the next five years. However, because of the airliness substantial loss carryforwards, BMI Regional estimates its marginal tax rate to be 10% over the next five years, so it will get very little tax benefit from the depreciation expenses. Thus BMI Regional considers leasing the airplanes instead. Suppose BMI Regional and the lessor face the same 5.0% borrowing rate, but the lessor has a 40% tax rate. For the purpose of this question, assume the fleet will be worthless after 5 years, the lease term is 5 years, and the lease qualifies as a true tax lease.

(a) What is the pre-tax lease rate for which the lessor will break even?

The lease rate is $. (round to $ million, three decimals, don't enter minus)

(b) What is the free cash flow of the lease for BMI Regional?

The FCF of the lease is $. (round to $ million, three decimals, don't enter minus)

(c) What is the NPV(lease-buy) for BMI Regional with this lease rate?

The NPV(lease-buy) is $. (round to $ million, three decimals, if result negative, use minus sign)

I have an excel file, but it seems like its impossible o upload an excel file...

10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 What is the gain to the lessee with this lease rate? C D E F G H I J K Fill in a parameter value Fill in a formula Lessor's Tax rate Borrowing Rate After tax borrowing Rate a. What is the lease rate for which the lessor will break even? 20,00% 32,00% 19.20% 11,52% 11,52% 5.76% Depreciation rate Year But Capital Expenditure 0,00 0,00 0,00 0,00 0,00 0,00 Depreciation Tax shield 0,00 000 0,00 0,00 000 000 Free Cash Flow (Buy) Lease 000 000 000 000 000 000 4 Lease Payments 0,00 0,000 C000 0,00 00N0 0000 Income Tax 6 Free Cash Flow (Lease) 0,000 000 000 000 000 000 Lessor Free Cash Flow 000 000 000 000 000 Lease but 0,00 NPV of buy and NPV of Lease must equal NPV of B 0,00 0,00 ease Annual Payment must be 0,00 Before tax lease charge must be 0,00 Lessee's Tax Rate Borrowing Rate After tax borrowing Rate Depreciation rate 20,00% L32,00% 1920% 11,52% 11,52%% 576% Year Bu Capital Expenditure 0.00 0,00 0,00 0,00 0,00 0,00 0,00 Depreciation Tax shield 0,00 000 0,00 0,000 000 000 Free Cash Flow (Buy) Lease 0.00 000 000 000 000 000 Lease Payments Income Tax Savings 0,00 000 0,00 0,00 000 000 0,00 000 0.00 0,00 000 000 Free Cash Flow (Lease 0,00 0,00 0,00 000 0,00 000 FCF Lease FCF Buy NPV of difference