Calculate the present value of the after-tax cash flows

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Bessey Aviation is a considering leasing or purchasing a small aircraft to transport executives between manufacturing facilities and t he main administrative headquarters. The firm is in the 40 percent tax bracket and its after-tax cost of debt is 7 percent. The estimated after-tax cash flows for the lease and purchase alternatives are given below: Cash Flow After Tax End of Year Lease Purchase 1 -64,329 -68,454 2 -64,329 -59,110 3 -64,329 -63,596 4 -64,329 -66,633 5 -64,329 30,056 A. Given the above cash flows for each alternative, calculate the present value of the after-tax cash flows using the after-tax cost of debt for each alternative. B. Which alternative do you recommend? Why?

Reference no: EM131558710

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