XYZ Manufacturing is currently in the market to purchase a new widget making machine. As CFO of the company, you have the responsibility to decide whether you are going to buy the machine through a loan or lease the machine. You know after 4 years a new and better widget making machine will be out in the market. As a leader in the industry of widget making, you know you have to be efficient and innovative. Goldman Sachs, as your main investment bank, has offered to help finance this purchase through a loan. The interest rate on the loan is 15%. The current yield to maturity after taxes on the company?s debt is 9%.The cost of the new machine is $1,750,000.Interest Only Payments on the loan would be $157,500 for the first three years and in the final year you would have to pay back the initial purchase price, plus one more year of the interest payment. You will also have a depreciations savings based on MACRS.Maintenance fees for owning or leasing the machine cost $25,000 a year and will be paid by the lessee The tax bracket for the company is 40%. After the 4 years, the machine will be sold for $500,000.If you are choosing to lease, a payment would be $750,000 a year for four years.

Only group 3. I do not need the other group's answer

Cost of Owning Group 1 Interest payments on bank loan Principal Repayment Maintenance Fee Maintenance Tax Shield Depr. Tax Savings Sale Value Tax on Residual Net Cash Flow 0 Discounted Cash Flow PV cost of owning at 9% 0 Cost of Leasing Tax Shield on Lease Payment Maintenance Fee Maintenance Tax Shield Net Cash Flow Discount factor Discount cash flow - Discount Rate PV cost of leasing at 9% 9% - Cost Comparison Net Advantage to Leasing (NAL)= PV Cost of Leasing- PV Cost of Owning = MACRS Year - Allowance Factor 1 2 3 0.33 0.45 0.15 4 0.07 1 - - 1 1.09 - Depreciation 2 - - 2 1.1881 - Depr. Tax Savings 3 - - 3 1.295029 - 4 Cells - - 4 1.41158161 - G2 to N48 are unlocked for unlocked for you to use to enter data or verbage. Cost of Owning Group 2 Interest payments on bank loan Principal Repayment Maintenance Fee Maintenance Tax Shield Depr. Tax Savings Sale Value Tax on Residual Net Cash Flow 0 Discounted Cash Flow PV cost of owning at 9% 0 Cost of Leasing Tax Shield on Lease Payment Maintenance Fee Maintenance Tax Shield Net Cash Flow Discount factor Discount cash flow Discount Rate PV cost of leasing at 9% 9% - Cost Comparison Net Advantage to Leasing (NAL)=PV Cost of Leasing- PV Cost of Owning = MACRS Year - Allowance Factor 1 2 3 0.33 0.45 0.15 4 0.07 1 - - 1 1.09 - Depreciation 2 - - 2 1.1881 - Depr. Tax Savings 3 - - 3 1.295029 - 4 Cells - - 4 1.41158161 - G2 to N48 are unlocked for unlocked for you to use to enter data or verbage. Cost of Owning Group 3 Interest payments on bank loan Principal Repayment Maintenance Fee Maintenance Tax Shield Depr. Tax Savings Sale Value Tax on Residual Net Cash Flow 0 Discounted Cash Flow PV cost of owning at 9% 0 Cost of Leasing Tax Shield on Lease Payment Maintenance Fee Maintenance Tax Shield Net Cash Flow Discount factor Discount cash flow Discount Rate PV cost of leasing at 9% 9% - Cost Comparison Net Advantage to Leasing (NAL)PV Cost of Leasing- PV Cost of Owning = MACRS Year - Allowance Factor 1 2 3 0.33 0.45 0.15 4 0.07 1 - - 1 1.09 - Depreciation 2 - - 2 1.1881 - Depr. Tax Savings 3 - - 3 1.295029 - 4 Cells - - 4 1.41158161 - G2 to N48 are unlocked for unlocked for you to use to enter data or verbage. Cost of Owning Group 4 Interest payments on bank loan Principal Repayment Maintenance Fee Maintenance Tax Shield Depr. Tax Savings Sale Value Tax on Residual Net Cash Flow 0 Discounted Cash Flow PV cost of owning at 9% 0 Cost of Leasing Tax Shield on Lease Payment Maintenance Fee Maintenance Tax Shield Net Cash Flow Discount factor Discount cash flow Discount Rate PV cost of leasing at 9% 9% - Cost Comparison Net Advantage to Leasing (NAL)= PV Cost of Leasing- PV Cost of Owning = MACRS Year - Allowance Factor 1 2 3 0.33 0.45 0.15 4 0.07 1 - - 1 1.09 - Depreciation 2 - - 2 1.1881 - Depr. Tax Savings 3 - - 3 1.295029 - 4 Cells - - 4 1.41158161 - G2 to N48 are unlocked for unlocked for you to use to enter data or verbage. Cost of Owning Group 5 Interest payments on bank loan Principal Repayment Maintenance Fee Maintenance Tax Shield Depr. Tax Savings Sale Value Tax on Residual Net Cash Flow 0 - Discounted Cash Flow PV cost of owning at 9% 0 Cost of Leasing Tax Shield on Lease Payment Maintenance Fee Maintenance Tax Shield Net Cash Flow Discount factor Discount cash flow Discount Rate PV cost of leasing at 9% 9% - Cost Comparison Net Advantage to Leasing (NAL)= PV Cost of Leasing- PV Cost of Owning = MACRS Year - Allowance Factor 1 2 3 0.33 0.45 0.15 4 0.07 1 - - 1 1.09 - Depreciation 2 - - 2 1.1881 - Depr. Tax Savings 3 - - 3 1.295029 - 4 Cells - - 4 1.41158161 - G2 to N48 are unlocked for unlocked for you to use to enter data or verbage