Solution-Calculate the tax savings from the lease payment

Calculate the tax savings from the lease payment

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Reference no: EM132467206

Assume that Theta Corporation is looking to enter into an Operating Lease for new machinery. Please help me to break down the following questions. I cannot seem to get the right answers

The Lease payment each year would be $125,000. Theta's tax rate is 30%, and it's pre-tax cost of debt is 12% The term of the lease is for 4 years, with the first payment made at the beginning of the year.

a. What discount rate will Theta Corporation use to discount the cash flows from this Lease?

b. Calculate the tax savings from the lease payment.

c. Complete the table to determine the Operating Lease Net Cash Flows.

Year

Lease Pmt.

Tax Savings

Net Cash flow

d. Calculate the NPV of Leasing.

e. If the NPV of Owning the machinery is ( $400,000) what is the NAL?

Reference no: EM132467206

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Calculate the tax savings from the lease payment

Reference no: EM132467206

Reference no: EM132467206

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