Scenario A

Year 1 2
Beginning Balance $ 715,000 $596,713
Annual Payment $186,212 186,212 186,212
Interest Before Tax @ 9.50% 67,925 56,688
Principal Reduction 118,287 129,524
Ending Balance $596,713 $467,189
Tax Rate 34.00%
Interest After Tax $44,831 $37,414

Total Interest Paid $142,600

Total Principal Paid $715,000

Scenario B
Year 1 2
Beginning Balance $ 715,000 $ 604,665
Annual Payment $203,285 203,285 203,285
Interest Before Tax @ 13.00% 92,950 78,606
Principal Reduction 110,335 124,678
Ending Balance $ 604,665 $467,189
Tax Rate 34.00%
Interest After Tax $61,347 $51,880

Total Interest Paid $195,819

Total Principal Paid $715,000

Scenario C
Year 1 2
Beginning Balance $ 715,000 $596,713
Annual Payment $186,212 186,212 186,212
Interest Before Tax @ 9.50% 67,925 56,688
Principal Reduction $ 118,287 $ 129,524
Ending Balance $596,713 $467,189
Tax Rate 0.00%
Interest After Tax $ 67,925.00 $ 56,687.73

Total Interest Paid $216,060

Total Principal Paid $715,000
Scenario D
Year 1 2
Beginning Balance $ 715,000 $ 604,665
Annual Payment $203,285 203,285 203,285
Interest Before Tax @ 13.00% 92,950 78,606
Principal Reduction 110,335 124,678
Ending Balance $ 604,665 $ 479,987
Tax Rate 0.00%
Interest After Tax $92,950 $78,606

Total Interest Paid $301,424

Total Principal Paid $715,000
 3 4 5
$467,189 $325,360 $170,057
186,212 186,212 186,212
44,383 30,909 16,155
141,829 155,303 170,057
$325,360 $170,057 $0

$29,293 $20,400 $10,663

3 4 5
$ 467,189 $ 325,360 $ 170,057
203,285 203,285 203,285
60,735 42,297 22,107
142,550 160,988 181,178
$325,360 $170,057 $0

$40,085 $27,916 $14,591

3 4 5 $ 67,925.00
$467,189 $325,360 $170,057 $ 56,687.73
186,212 186,212 186,212 $ 44,382.92
44,383 30,909 16,155 $ 30,909.16
$ 141,829 $ 155,303 $ 170,057 $ 16,155.38
$325,360 $170,057 $0

$ 44,382.92 $ 30,909.16 $ 16,155.38

 3 4 5
$ 479,987 $ 339,100 $ 179,898
203,285 203,285 203,285
62,398 44,083 23,387
140,887 159,202 179,898
$ 339,100 $ 179,898 $ (0)

$62,398 $44,083 $23,387

 Lessee Input Data:

1. Tax Rate 34.00%

2. Pre-tax Interest Rate 9.50% 13.00%
3. Equipment Cost $ 715,000
4. Lease Payment $ 160,003
5. Guaranteed Residual Val 11.2729%
6. Cash Down Payment $ -
7. Annual Loan Term 5

Results for Lessee:

1. Loan NPV $469,273

2. Lease NPV $469,273
3. Loan IRR 6.27%
4. Lease IRR 6.27%
5. Savings $ (0)

$ 118,287
$ 129,524
$ 141,829
$ 155,303
$ 170,057
Scenario A
NPV
Tax rate: 34.00% Equipment cost:
Pretax interest rate: 9.50% Lease payment:

Interest Five-Year
Payment MACRS3
after Principal Depr.
Year Tax 2
Payment2 Rate
0
1 $44,831 $118,287 20.00%
2 $37,414 $129,524 32.00%
3 $29,293 $141,829 19.20%
4 $20,400 $155,303 11.52%
5 $10,663 $170,057 11.52%
Sum $142,600 $715,000 94.24%
NPV

IRR

Lease Forgone Tax Forgone

Payment Savings Residual Value
after Associated with after
Year Tax2 Depreciation2 Tax2
0 ($102,326)
1 ($102,326) ($48,620)
2 ($102,326) ($77,792)
3 ($102,326) ($46,675)
4 ($102,326) ($28,005)
5 $0 ($28,005) ($67,199)
Sum ($511,632) ($229,097) ($67,199)
IRR

Scenario B
NPV
Tax rate: 34.00% Equipment cost:
 Pretax interest rate: 13.00% Lease payment:

Interest Five-Year
Payment MACRS3
after Principal Depr.
Year Tax2 Payment2 Rate
0
1 $44,831 $118,287 20.00%
2 $37,414 $129,524 32.00%
3 $29,293 $141,829 19.20%
4 $20,400 $155,303 11.52%
5 $10,663 $170,057 11.52%
Sum $142,600 $715,000 94.24%
NPV

IRR

Lease Forgone Tax Forgone

Payment Savings Residual Value
after Associated with after
Year Tax2 Depreciation2 Tax2
0 ($102,326)
1 ($102,326) ($48,620)
2 ($102,326) ($77,792)
3 ($102,326) ($46,675)
4 ($102,326) ($28,005)
5 $0 ($28,005) ($67,199)
Sum ($511,632) ($229,097) ($67,199)
IRR

Scenario C
NPV
Tax rate: 0.00% Equipment cost:
Pretax interest rate: 9.50% Lease payment:

Interest Five-Year
 Payment MACRS3
after Principal Depr.
Year Tax 2
Payment2 Rate
0
1 $ 67,925 $118,287 20.00%
2 $ 56,688 $129,524 32.00%
3 $ 44,383 $141,829 19.20%
4 $ 30,909 $155,303 11.52%
5 $ 16,155 $170,057 11.52%
Sum $ 216,060 $715,000 94.24%
NPV

IRR

Lease Forgone Tax Forgone

Payment Savings Residual Value
after Associated with after
Year Tax2 Depreciation2 Tax2
0 ($155,040)
1 ($155,040) $0
2 ($155,040) $0
3 ($155,040) $0
4 ($155,040) $0
5 $0 $0 $ (80,601)
Sum ($775,200) $0 ($80,601)
IRR

Scenario D
NPV
Tax rate: 0.00% Equipment cost:
Pretax interest rate: 13.00% Lease payment:

Interest Five-Year
Payment MACRS3
after Principal Depr.
Year Tax 2
Payment2 Rate
 0
1 $ 67,925 $118,287 20.00%
2 $ 56,688 $129,524 32.00%
3 $ 44,383 $141,829 19.20%
4 $ 30,909 $155,303 11.52%
5 $ 16,155 $170,057 11.52%
Sum $ 216,060 $715,000 94.24%
NPV

IRR

Lease Forgone Tax Forgone

Payment Savings Residual Value
after Associated with after
Year Tax2 Depreciation2 Tax2
0 ($155,040)
1 ($155,040) $0
2 ($155,040) $0
3 ($155,040) $0
4 ($155,040) $0
5 $0 $0 $ (80,601)
Sum ($775,200) $0 ($80,601)
IRR
$ 715,000
$ 155,040

Residual
Depr. Depr. Cash Flow Loan Lease
before Tax after Cash Cash
Tax Savings Tax4 Outflow5 Outflow
$0 $102,326
$143,000 ($48,620) $114,498 $102,326
$228,800 ($77,792) $89,146 $102,326
$137,280 ($46,675) $124,447 $102,326
$82,368 ($28,005) $147,698 $102,326
$82,368 ($28,005) ($67,199) $85,515 $0
$673,816 ($229,097) ($67,199) $561,303 $511,632
$469,273 $454,717

Lease Residual CF
Initial Payment $ 715,000
Purchase Less 11.27%
Price Incremental $ 80,601.24
Saved Cash Flow $ 13,401.86
$715,000 $612,674 $ 67,199.38
($150,946)
($180,118)
($149,002)
($130,332)
($95,204)
$715,000 ($92,929)
5.32%

$ 715,000
$ 155,040

Residual
Depr. Depr. Cash Flow Loan Lease
before Tax after Cash Cash
Tax Savings Tax4 Outflow5 Outflow
$0 $102,326
$143,000 ($48,620) $114,498 $102,326
$228,800 ($77,792) $89,146 $102,326
$137,280 ($46,675) $124,447 $102,326
$82,368 ($28,005) $147,698 $102,326
$82,368 ($28,005) ($67,199) $85,515 $0
$673,816 ($229,097) ($67,199) $561,303 $511,632
$441,202 $436,915

Lease Residual CF
Initial Payment $ 715,000
Purchase Less 11.27%
Price Incremental $ 80,601.24
Saved Cash Flow $ 13,401.86
$715,000 $612,674 $ 67,199.38
($150,946)
($180,118)
($149,002)
($130,332)
($95,204)
$715,000 ($92,929)
5.32%

$ 715,000
$ 155,040

Residual
 Depr. Depr. Cash Flow Loan Lease
before Tax after Cash Cash
Tax Savings Tax4 Outflow5 Outflow
$0 $155,040
$143,000 $0 $186,212 $155,040
$228,800 $0 $186,212 $155,040
$137,280 $0 $186,212 $155,040
$82,368 $0 $186,212 $155,040
$82,368 $0 $ (80,601) $105,611 $0
$673,816 $0 ($80,601) $850,459 $775,200
$663,800 $651,863

Lease Residual CF
Initial Payment $ 715,000
Purchase Less 11.27%
Price Incremental $ 80,601.24
Saved Cash Flow $ 13,401.86
$715,000 $559,960 $ 67,199.38
($155,040)
($155,040)
($155,040)
($155,040)
($80,601)
$715,000 ($140,801)
8.61%

$ 715,000
$ 155,040

Residual
Depr. Depr. Cash Flow Loan Lease
before Tax after Cash Cash
Tax Savings Tax4 Outflow5 Outflow
 $0 $155,040
$143,000 $0 $186,212 $155,040
$228,800 $0 $186,212 $155,040
$137,280 $0 $186,212 $155,040
$82,368 $0 $186,212 $155,040
$82,368 $0 $ (80,601) $105,611 $0
$673,816 $0 ($80,601) $850,459 $775,200
$611,204 $616,202

Lease Residual CF
Initial Payment $ 715,000
Purchase Less 11.27%
Price Incremental $ 80,601.24
Saved Cash Flow $ 13,401.86
$715,000 $559,960 $ 67,199.38
($155,040)
($155,040)
($155,040)
($155,040)
($80,601)
$715,000 ($140,801)
8.61%
$ 80,601.24
$ 41,184.00
$ 39,417.24
$ 13,401.86

$ 715,000
$ 673,816.00
$ 41,184.00
$ 80,601.24
$ 41,184.00
$ 39,417.24
$ 13,401.86

$ 715,000
$ 673,816.00
$ 41,184.00
$ 80,601.24
$ 41,184.00
$ 39,417.24
$ -

$ 715,000
$ 673,816.00
$ 41,184.00
$ 80,601.24
$ 41,184.00
$ 39,417.24
$ -

$ 715,000
$ 673,816.00
$ 41,184.00
Scenario A
NPV
Tax rate: 34.00% Equipment cost:
Pretax interest rate: 9.50% Lease payment:

Interest Five-Year
Payment MACRS3
after Principal Depr.
Year Tax 2
Payment2 Rate
0
1 $44,831 $118,287 20.00%
2 $37,414 $129,524 32.00%
3 $29,293 $141,829 19.20%
4 $20,400 $155,303 11.52%
5 $10,663 $170,057 11.52%
Sum $142,600 $715,000 94.24%
NPV

IRR

Lease Forgone Tax Forgone

Payment Savings Residual Value
after Associated with after
Year Tax2 Depreciation2 Tax2
0 ($105,602)
1 ($105,602) ($48,620)
2 ($105,602) ($77,792)
3 ($105,602) ($46,675)
4 ($105,602) ($28,005)
5 $0 ($28,005) ($67,199)
Sum ($528,010) ($229,097) ($67,199)
IRR

Scenario B
NPV
Tax rate: 34.00% Equipment cost:
 Pretax interest rate: 13.00% Lease payment:

Interest Five-Year
Payment MACRS3
after Principal Depr.
Year Tax2 Payment2 Rate
0
1 $44,831 $118,287 20.00%
2 $37,414 $129,524 32.00%
3 $29,293 $141,829 19.20%
4 $20,400 $155,303 11.52%
5 $10,663 $170,057 11.52%
Sum $142,600 $715,000 94.24%
NPV

IRR

Lease Forgone Tax Forgone

Payment Savings Residual Value
after Associated with after
Year Tax2 Depreciation2 Tax2
0 ($105,602)
1 ($105,602) ($48,620)
2 ($105,602) ($77,792)
3 ($105,602) ($46,675)
4 ($105,602) ($28,005)
5 $0 ($28,005) ($67,199)
Sum ($528,010) ($229,097) ($67,199)
IRR

Scenario C
NPV
Tax rate: 0.00% Equipment cost:
Pretax interest rate: 9.50% Lease payment:

Interest Five-Year
 Payment MACRS3
after Principal Depr.
Year Tax 2
Payment2 Rate
0
1 $ 67,925 $118,287 20.00%
2 $ 56,688 $129,524 32.00%
3 $ 44,383 $141,829 19.20%
4 $ 30,909 $155,303 11.52%
5 $ 16,155 $170,057 11.52%
Sum $ 216,060 $715,000 94.24%
NPV

IRR

Lease Forgone Tax Forgone

Payment Savings Residual Value
after Associated with after
Year Tax2 Depreciation2 Tax2
0 ($160,003)
1 ($160,003) $0
2 ($160,003) $0
3 ($160,003) $0
4 ($160,003) $0
5 $0 $0 $ (80,601)
Sum ($800,015) $0 ($80,601)
IRR

Scenario D
NPV
Tax rate: 0.00% Equipment cost:
Pretax interest rate: 13.00% Lease payment:

Interest Five-Year
Payment MACRS3
after Principal Depr.
Year Tax 2
Payment2 Rate
 0
1 $ 67,925 $118,287 20.00%
2 $ 56,688 $129,524 32.00%
3 $ 44,383 $141,829 19.20%
4 $ 30,909 $155,303 11.52%
5 $ 16,155 $170,057 11.52%
Sum $ 216,060 $715,000 94.24%
NPV

IRR

Lease Forgone Tax Forgone

Payment Savings Residual Value
after Associated with after
Year Tax2 Depreciation2 Tax2
0 ($160,003)
1 ($160,003) $0
2 ($160,003) $0
3 ($160,003) $0
4 ($160,003) $0
5 $0 $0 $ (80,601)
Sum ($800,015) $0 ($80,601)
IRR
$ 715,000
$ 160,003

Residual
Depr. Depr. Cash Flow Loan Lease
before Tax after Cash Cash
Tax Savings Tax4 Outflow5 Outflow
$0 $105,602
$143,000 ($48,620) $114,498 $105,602
$228,800 ($77,792) $89,146 $105,602
$137,280 ($46,675) $124,447 $105,602
$82,368 ($28,005) $147,698 $105,602
$82,368 ($28,005) ($67,199) $85,515 $0
$673,816 ($229,097) ($67,199) $561,303 $528,010
$469,273 $469,273

Lease Residual CF
Initial Payment $ 715,000
Purchase Less 11.27%
Price Incremental $ 80,601.24
Saved Cash Flow $ 13,401.86
$715,000 $609,398 $ 67,199.38
($154,222)
($183,394)
($152,277)
($133,607)
($95,204)
$715,000 ($109,307)
6.27%

$ 715,000
$ 160,003

Residual
Depr. Depr. Cash Flow Loan Lease
before Tax after Cash Cash
Tax Savings Tax4 Outflow5 Outflow
$0 $105,602
$143,000 ($48,620) $114,498 $105,602
$228,800 ($77,792) $89,146 $105,602
$137,280 ($46,675) $124,447 $105,602
$82,368 ($28,005) $147,698 $105,602
$82,368 ($28,005) ($67,199) $85,515 $0
$673,816 ($229,097) ($67,199) $561,303 $528,010
$469,273 $450,901

Lease Residual CF
Initial Payment $ 715,000
Purchase Less 11.27%
Price Incremental $ 80,601.24
Saved Cash Flow $ 13,401.86
$715,000 $609,398 $ 67,199.38
($154,222)
($183,394)
($152,277)
($133,607)
($95,204)
$715,000 ($109,307)
6.27%

$ 715,000
$ 160,003

Residual
 Depr. Depr. Cash Flow Loan Lease
before Tax after Cash Cash
Tax Savings Tax4 Outflow5 Outflow
$0 $160,003
$143,000 $0 $186,212 $160,003
$228,800 $0 $186,212 $160,003
$137,280 $0 $186,212 $160,003
$82,368 $0 $186,212 $160,003
$82,368 $0 $ (80,601) $105,611 $0
$673,816 $0 ($80,601) $850,459 $800,015
$719,196 $672,730

Lease Residual CF
Initial Payment $ 715,000
Purchase Less 11.27%
Price Incremental $ 80,601.24
Saved Cash Flow $ 13,401.86
$715,000 $554,997 $ 67,199.38
($160,003)
($160,003)
($160,003)
($160,003)
($80,601)
$715,000 ($165,616)
10.17%

$ 715,000
$ 160,003

Residual
Depr. Depr. Cash Flow Loan Lease
before Tax after Cash Cash
Tax Savings Tax4 Outflow5 Outflow
 $0 $160,003
$143,000 $0 $186,212 $160,003
$228,800 $0 $186,212 $160,003
$137,280 $0 $186,212 $160,003
$82,368 $0 $186,212 $160,003
$82,368 $0 $ (80,601) $105,611 $0
$673,816 $0 ($80,601) $850,459 $800,015
$719,196 $635,927

Lease Residual CF
Initial Payment $ 715,000
Purchase Less 11.27%
Price Incremental $ 80,601.24
Saved Cash Flow $ 13,401.86
$715,000 $554,997 $ 67,199.38
($160,003)
($160,003)
($160,003)
($160,003)
($80,601)
$715,000 ($165,616)
10.17%
$ 80,601.24
$ 41,184.00
$ 39,417.24
$ 13,401.86

$ 715,000
$ 673,816.00
$ 41,184.00
$ 80,601.24
$ 41,184.00
$ 39,417.24
$ 13,401.86

$ 715,000
$ 673,816.00
$ 41,184.00
$ 80,601.24
$ 41,184.00
$ 39,417.24
$ -

$ 715,000
$ 673,816.00
$ 41,184.00
$ 80,601.24
$ 41,184.00
$ 39,417.24
$ -

$ 715,000
$ 673,816.00
$ 41,184.00
Scenario A
NPV
Tax rate: 34.00% Equipment cost:
Pretax interest rate: 9.50% Lease payment:

Interest Five-Year
Payment MACRS3
after Principal Depr.
Year Tax 2
Payment2 Rate
0
1 $44,831 $118,287 20.00%
2 $37,414 $129,524 32.00%
3 $29,293 $141,829 19.20%
4 $20,400 $155,303 11.52%
5 $10,663 $170,057 11.52%
Sum $142,600 $715,000 94.24%
NPV

IRR

Lease Forgone Tax Forgone

Payment Savings Residual Value
after Associated with after
Year Tax2 Depreciation2 Tax2
0 ($107,151)
1 ($107,151) ($48,620)
2 ($107,151) ($77,792)
3 ($107,151) ($46,675)
4 ($107,151) ($28,005)
5 $0 ($28,005) ($67,199)
Sum ($535,755) ($229,097) ($67,199)
IRR

Scenario B
NPV
Tax rate: 34.00% Equipment cost:
 Pretax interest rate: 13.00% Lease payment:

Interest Five-Year
Payment MACRS3
after Principal Depr.
Year Tax2 Payment2 Rate
0
1 $44,831 $118,287 20.00%
2 $37,414 $129,524 32.00%
3 $29,293 $141,829 19.20%
4 $20,400 $155,303 11.52%
5 $10,663 $170,057 11.52%
Sum $142,600 $715,000 94.24%
NPV

IRR

Lease Forgone Tax Forgone

Payment Savings Residual Value
after Associated with after
Year Tax2 Depreciation2 Tax2
0 ($107,151)
1 ($107,151) ($48,620)
2 ($107,151) ($77,792)
3 ($107,151) ($46,675)
4 ($107,151) ($28,005)
5 $0 ($28,005) ($67,199)
Sum ($535,755) ($229,097) ($67,199)
IRR

Scenario C
NPV
Tax rate: 0.00% Equipment cost:
Pretax interest rate: 9.50% Lease payment:

Interest Five-Year
 Payment MACRS3
after Principal Depr.
Year Tax 2
Payment2 Rate
0
1 $ 67,925 $118,287 20.00%
2 $ 56,688 $129,524 32.00%
3 $ 44,383 $141,829 19.20%
4 $ 30,909 $155,303 11.52%
5 $ 16,155 $170,057 11.52%
Sum $ 216,060 $715,000 94.24%
NPV

IRR

Lease Forgone Tax Forgone

Payment Savings Residual Value
after Associated with after
Year Tax2 Depreciation2 Tax2
0 ($162,350)
1 ($162,350) $0
2 ($162,350) $0
3 ($162,350) $0
4 ($162,350) $0
5 $0 $0 $ (80,601)
Sum ($811,750) $0 ($80,601)
IRR

Scenario D
NPV
Tax rate: 0.00% Equipment cost:
Pretax interest rate: 13.00% Lease payment:

Interest Five-Year
Payment MACRS3
after Principal Depr.
Year Tax 2
Payment2 Rate
 0
1 $ 67,925 $118,287 20.00%
2 $ 56,688 $129,524 32.00%
3 $ 44,383 $141,829 19.20%
4 $ 30,909 $155,303 11.52%
5 $ 16,155 $170,057 11.52%
Sum $ 216,060 $715,000 94.24%
NPV

IRR

Lease Forgone Tax Forgone

Payment Savings Residual Value
after Associated with after
Year Tax2 Depreciation2 Tax2
0 ($162,350)
1 ($162,350) $0
2 ($162,350) $0
3 ($162,350) $0
4 ($162,350) $0
5 $0 $0 $ (80,601)
Sum ($811,750) $0 ($80,601)
IRR
$ 715,000
$ 162,350

Residual
Depr. Depr. Cash Flow Loan Lease
before Tax after Cash Cash
Tax Savings Tax4 Outflow5 Outflow
$0 $107,151
$143,000 ($48,620) $114,498 $107,151
$228,800 ($77,792) $89,146 $107,151
$137,280 ($46,675) $124,447 $107,151
$82,368 ($28,005) $147,698 $107,151
$82,368 ($28,005) ($67,199) $85,515 $0
$673,816 ($229,097) ($67,199) $561,303 $535,755
$469,273 $476,156

Lease Residual CF
Initial Payment $ 715,000
Purchase Less 11.27%
Price Incremental $ 80,601.24
Saved Cash Flow $ 13,401.86
$715,000 $607,849 $ 67,199.38
($155,771)
($184,943)
($153,826)
($135,156)
($95,204)
$715,000 ($117,052)
6.72%

$ 715,000
$ 162,350

Residual
Depr. Depr. Cash Flow Loan Lease
before Tax after Cash Cash
Tax Savings Tax4 Outflow5 Outflow
$0 $107,151
$143,000 ($48,620) $114,498 $107,151
$228,800 ($77,792) $89,146 $107,151
$137,280 ($46,675) $124,447 $107,151
$82,368 ($28,005) $147,698 $107,151
$82,368 ($28,005) ($67,199) $85,515 $0
$673,816 ($229,097) ($67,199) $561,303 $535,755
$469,273 $457,515

Lease Residual CF
Initial Payment $ 715,000
Purchase Less 11.27%
Price Incremental $ 80,601.24
Saved Cash Flow $ 13,401.86
$715,000 $607,849 $ 67,199.38
($155,771)
($184,943)
($153,826)
($135,156)
($95,204)
$715,000 ($117,052)
6.72%

$ 715,000
$ 162,350

Residual
 Depr. Depr. Cash Flow Loan Lease
before Tax after Cash Cash
Tax Savings Tax4 Outflow5 Outflow
$0 $162,350
$143,000 $0 $186,212 $162,350
$228,800 $0 $186,212 $162,350
$137,280 $0 $186,212 $162,350
$82,368 $0 $186,212 $162,350
$82,368 $0 $ (80,601) $105,611 $0
$673,816 $0 ($80,601) $850,459 $811,750
$719,196 $682,598

Lease Residual CF
Initial Payment $ 715,000
Purchase Less 11.27%
Price Incremental $ 80,601.24
Saved Cash Flow $ 13,401.86
$715,000 $552,650 $ 67,199.38
($162,350)
($162,350)
($162,350)
($162,350)
($80,601)
$715,000 ($177,351)
10.91%

$ 715,000
$ 162,350

Residual
Depr. Depr. Cash Flow Loan Lease
before Tax after Cash Cash
Tax Savings Tax4 Outflow5 Outflow
 $0 $162,350
$143,000 $0 $186,212 $162,350
$228,800 $0 $186,212 $162,350
$137,280 $0 $186,212 $162,350
$82,368 $0 $186,212 $162,350
$82,368 $0 $ (80,601) $105,611 $0
$673,816 $0 ($80,601) $850,459 $811,750
$719,196 $645,255

Lease Residual CF
Initial Payment $ 715,000
Purchase Less 11.27%
Price Incremental $ 80,601.24
Saved Cash Flow $ 13,401.86
$715,000 $552,650 $ 67,199.38
($162,350)
($162,350)
($162,350)
($162,350)
($80,601)
$715,000 ($177,351)
10.91%
$ 80,601.24
$ 41,184.00
$ 39,417.24
$ 13,401.86

$ 715,000
$ 673,816.00
$ 41,184.00
$ 80,601.24
$ 41,184.00
$ 39,417.24
$ 13,401.86

$ 715,000
$ 673,816.00
$ 41,184.00
$ 80,601.24
$ 41,184.00
$ 39,417.24
$ -

$ 715,000
$ 673,816.00
$ 41,184.00
$ 80,601.24
$ 41,184.00
$ 39,417.24
$ -

$ 715,000
$ 673,816.00
$ 41,184.00
Scenario A
NPV
Tax rate: 34.00% Equipment cost:
Pretax interest rate: 9.50% Lease payment:

Interest Five-Year
Payment MACRS3
after Principal Depr.
Year Tax 2
Payment2 Rate
0
1 $44,831 $118,287 20.00%
2 $37,414 $129,524 32.00%
3 $29,293 $141,829 19.20%
4 $20,400 $155,303 11.52%
5 $10,663 $170,057 11.52%
Sum $142,600 $715,000 94.24%
NPV

IRR

Lease Forgone Tax Forgone

Payment Savings Residual Value
after Associated with after
Year Tax2 Depreciation2 Tax2
0 ($108,742)
1 ($108,742) ($48,620)
2 ($108,742) ($77,792)
3 ($108,742) ($46,675)
4 ($108,742) ($28,005)
5 $0 ($28,005) ($67,199)
Sum ($543,708) ($229,097) ($67,199)
IRR

Scenario B
NPV
Tax rate: 34.00% Equipment cost:
 Pretax interest rate: 13.00% Lease payment:

Interest Five-Year
Payment MACRS3
after Principal Depr.
Year Tax2 Payment2 Rate
0
1 $44,831 $118,287 20.00%
2 $37,414 $129,524 32.00%
3 $29,293 $141,829 19.20%
4 $20,400 $155,303 11.52%
5 $10,663 $170,057 11.52%
Sum $142,600 $715,000 94.24%
NPV

IRR

Lease Forgone Tax Forgone

Payment Savings Residual Value
after Associated with after
Year Tax2 Depreciation2 Tax2
0 ($108,742)
1 ($108,742) ($48,620)
2 ($108,742) ($77,792)
3 ($108,742) ($46,675)
4 ($108,742) ($28,005)
5 $0 ($28,005) ($67,199)
Sum ($543,708) ($229,097) ($67,199)
IRR

Scenario C
NPV
Tax rate: 0.00% Equipment cost:
Pretax interest rate: 9.50% Lease payment:

Interest Five-Year
 Payment MACRS3
after Principal Depr.
Year Tax 2
Payment2 Rate
0
1 $ 67,925 $118,287 20.00%
2 $ 56,688 $129,524 32.00%
3 $ 44,383 $141,829 19.20%
4 $ 30,909 $155,303 11.52%
5 $ 16,155 $170,057 11.52%
Sum $ 216,060 $715,000 94.24%
NPV

IRR

Lease Forgone Tax Forgone

Payment Savings Residual Value
after Associated with after
Year Tax2 Depreciation2 Tax2
0 ($164,760)
1 ($164,760) $0
2 ($164,760) $0
3 ($164,760) $0
4 ($164,760) $0
5 $0 $0 $ (80,601)
Sum ($823,800) $0 ($80,601)
IRR

Scenario D
NPV
Tax rate: 0.00% Equipment cost:
Pretax interest rate: 13.00% Lease payment:

Interest Five-Year
Payment MACRS3
after Principal Depr.
Year Tax 2
Payment2 Rate
 0
1 $ 67,925 $118,287 20.00%
2 $ 56,688 $129,524 32.00%
3 $ 44,383 $141,829 19.20%
4 $ 30,909 $155,303 11.52%
5 $ 16,155 $170,057 11.52%
Sum $ 216,060 $715,000 94.24%
NPV

IRR

Lease Forgone Tax Forgone

Payment Savings Residual Value
after Associated with after
Year Tax2 Depreciation2 Tax2
0 ($164,760)
1 ($164,760) $0
2 ($164,760) $0
3 ($164,760) $0
4 ($164,760) $0
5 $0 $0 $ (80,601)
Sum ($823,800) $0 ($80,601)
IRR
$ 715,000
$ 164,760

Residual
Depr. Depr. Cash Flow Loan Lease
before Tax after Cash Cash
Tax Savings Tax4 Outflow5 Outflow
$0 $108,742
$143,000 ($48,620) $114,498 $108,742
$228,800 ($77,792) $89,146 $108,742
$137,280 ($46,675) $124,447 $108,742
$82,368 ($28,005) $147,698 $108,742
$82,368 ($28,005) ($67,199) $85,515 $0
$673,816 ($229,097) ($67,199) $561,303 $543,708
$469,273 $483,225

Lease Residual CF
Initial Payment $ 715,000
Purchase Less 11.27%
Price Incremental $ 80,601.24
Saved Cash Flow $ 13,401.86
$715,000 $606,258 $ 67,199.38
($157,362)
($186,534)
($155,417)
($136,747)
($95,204)
$715,000 ($125,005)
7.19%

$ 715,000
$ 164,760

Residual
Depr. Depr. Cash Flow Loan Lease
before Tax after Cash Cash
Tax Savings Tax4 Outflow5 Outflow
$0 $108,742
$143,000 ($48,620) $114,498 $108,742
$228,800 ($77,792) $89,146 $108,742
$137,280 ($46,675) $124,447 $108,742
$82,368 ($28,005) $147,698 $108,742
$82,368 ($28,005) ($67,199) $85,515 $0
$673,816 ($229,097) ($67,199) $561,303 $543,708
$469,273 $464,306

Lease Residual CF
Initial Payment $ 715,000
Purchase Less 11.27%
Price Incremental $ 80,601.24
Saved Cash Flow $ 13,401.86
$715,000 $606,258 $ 67,199.38
($157,362)
($186,534)
($155,417)
($136,747)
($95,204)
$715,000 ($125,005)
7.19%

$ 715,000
$ 164,760

Residual
 Depr. Depr. Cash Flow Loan Lease
before Tax after Cash Cash
Tax Savings Tax4 Outflow5 Outflow
$0 $164,760
$143,000 $0 $186,212 $164,760
$228,800 $0 $186,212 $164,760
$137,280 $0 $186,212 $164,760
$82,368 $0 $186,212 $164,760
$82,368 $0 $ (80,601) $105,611 $0
$673,816 $0 ($80,601) $850,459 $823,800
$719,196 $692,730

Lease Residual CF
Initial Payment $ 715,000
Purchase Less 11.27%
Price Incremental $ 80,601.24
Saved Cash Flow $ 13,401.86
$715,000 $550,240 $ 67,199.38
($164,760)
($164,760)
($164,760)
($164,760)
($80,601)
$715,000 ($189,401)
11.68%

$ 715,000
$ 164,760

Residual
Depr. Depr. Cash Flow Loan Lease
before Tax after Cash Cash
Tax Savings Tax4 Outflow5 Outflow
 $0 $164,760
$143,000 $0 $186,212 $164,760
$228,800 $0 $186,212 $164,760
$137,280 $0 $186,212 $164,760
$82,368 $0 $186,212 $164,760
$82,368 $0 $ (80,601) $105,611 $0
$673,816 $0 ($80,601) $850,459 $823,800
$719,196 $654,834

Lease Residual CF
Initial Payment $ 715,000
Purchase Less 11.27%
Price Incremental $ 80,601.24
Saved Cash Flow $ 13,401.86
$715,000 $550,240 $ 67,199.38
($164,760)
($164,760)
($164,760)
($164,760)
($80,601)
$715,000 ($189,401)
11.68%
$ 80,601.24
$ 41,184.00
$ 39,417.24
$ 13,401.86

$ 715,000
$ 673,816.00
$ 41,184.00
$ 80,601.24
$ 41,184.00
$ 39,417.24
$ 13,401.86

$ 715,000
$ 673,816.00
$ 41,184.00
$ 80,601.24
$ 41,184.00
$ 39,417.24
$ -

$ 715,000
$ 673,816.00
$ 41,184.00
$ 80,601.24
$ 41,184.00
$ 39,417.24
$ -

$ 715,000
$ 673,816.00
$ 41,184.00
 Lessee Input Data:

1. Tax Rate 34.00%

2. Pre-tax Interest Rate 9.50%
3. Equipment Cost $ 715,000
4. Lease Payment $ 160,003
5. Guaranteed Residual Value 11.2729%
6. Cash Down Payment $ -
7. Annual Loan Term 5

Results for Lessee:

1. Loan NPV $469,273

2. Lease NPV $469,273
3. Loan IRR 6.27%
4. Lease IRR 6.27%
5. Savings $ (0)

Faulhaber Gmbh A B
Loan NPV $0.00
Lease NPV
Loan IRR
Lease IRR
Savings
 FB HH

FB HH
Equipment Cost $759,000 $737,000
Lease Payment $170,000 $163,000
Residual Value 15.00% 24.00%

C D
 tax interest rate
A 34% 9.5%
B 34% 9.5%
C 0% 13%
D 0% 13%
Scenario A B C
Effective tax rate 34.0% 34.0% 0.0%
Pretax cost of debt 9.5% 13.0% 9.5%
After-tax cost of debt 6.27% 8.58% 9.50%

NPV of loan (borrow-and-buy) $469,273 $484,546 $663,800

IRR of loan (borrow-and-buy) 6.27% 8.58% 9.50%

Leasing option #1 $155,040 $155,040 $155,040

NPV of leasing option #1 $454,717 $436,915 $651,863
IRR of lease 5.32% 5.32% 8.61%
Lease advantage over borrowing $14,556 $47,631 $11,937

Leasing option #2 $160,003 $160,003 $160,003

NPV of leasing option #2 $469,273 $450,901 $672,730
IRR of lease 6.27% 6.27% 10.17%
Lease advantage over borrowing $0 $33,645 ($8,930)

Leasing option #3 $162,350 $162,350 $162,350

NPV of leasing option #3 $476,156 $457,515 $682,598
IRR of lease 6.72% 6.72% 10.91%
Lease advantage over borrowing ($6,883) $27,031 ($18,798)

Leasing option #4 $164,760 $164,760 $164,760

NPV of leasing option #4 $483,225 $464,306 $692,730
IRR of lease 7.19% 7.19% 11.68%
Lease advantage over borrowing ($13,952) $20,240 ($28,930)

Faulhaber Gmbh
NPV of loan
NPV of lease
IRR of lease
Lease advantage over borrowing

Honshu Heavy Industries

NPV of loan
NPV of lease
IRR of lease
Lease advantage over borrowing
 D Scenario
0.0% Effective tax rate
13.0% Pretax cost of debt
13.00% After-tax cost of debt

$671,253 NPV of loan (borrow-and-buy)

13.00% IRR of loan (borrow-and-buy)

$155,040 Leasing option #1

$616,202 NPV of leasing option #1
8.61% IRR of lease
$55,051 Lease advantage over borrowing

$160,003 Leasing option #2

$635,927 NPV of leasing option #2
10.17% IRR of lease
$35,326 Lease advantage over borrowing

$162,350 Leasing option #3

$645,255 NPV of leasing option #3
10.91% IRR of lease
$25,998 Lease advantage over borrowing

$164,760 Leasing option #4

$654,834 NPV of leasing option #4
11.68% IRR of lease
$16,419 Lease advantage over borrowing
 A B C D
34.0% 34.0% 0.0% 0.0%
9.5% 13.0% 9.5% 13.0%
6.27% 8.58% 9.50% 13.00%

$469,273 $484,546 $663,800 $671,253

6.27% 8.58% 9.50% 13.00%

$155,040 $155,040 $155,040 $155,040

$454,717 $436,915 $651,863 $616,202
5.32% 5.32% 8.61% 8.61%
$14,556 $47,631 $11,937 $55,051

$160,003 $160,003 $160,003 $160,003

$469,273 $450,901 $672,730 $635,927
6.27% 6.27% 10.17% 10.17%
$0 $33,645 ($8,930) $35,326

$162,350 $162,350 $162,350 $162,350

$476,156 $457,515 $682,598 $645,255
6.72% 6.72% 10.91% 10.91%
($6,883) $27,031 ($18,798) $25,998

$164,760 $164,760 $164,760 $164,760

$483,225 $464,306 $692,730 $654,834
7.19% 7.19% 11.68% 11.68%
($13,952) $20,240 ($28,930) $16,419
FG
Scenario A
Year 1 2 3
Beginning Balance $759,000 $633,434 $495,939
Annual Payment $197,671 $197,671 $197,671 $197,671
Interest Before Tax @ 9.5% $72,105 $60,176 $47,114
Principal Reduction $125,566 $137,495 $150,557
Ending Balance $633,434 $495,939 $345,382
Tax Rate 34%
Interest After Tax $47,589 $39,716 $31,095

Total Interest Paid $151,375

Total Principal Paid $759,000

Scenario B
Year 1 2 3
Beginning Balance $715,000 $604,665 $467,189
Annual Payment $203,285 $203,285 $203,285 $203,285
Interest Before Tax @ 13% $92,950 $78,606 $60,735
Principal Reduction $110,335 $124,678 $142,550
Ending Balance $604,665 $467,189 $325,360
Tax Rate 34%
Interest After Tax $61,347 $51,880 $40,085

Total Interest Paid $195,819

Total Principal Paid 715000

Scenario C
Year 1 2 3
Beginning Balance $715,000 $596,713 $467,189
Annual Payment $186,212 $186,212 $186,212 $186,212
Interest Before Tax @ 10% $67,925 $56,688 $44,383
Principal Reduction $118,287 $129,524 $141,829
Ending Balance $596,713 $467,189 $325,360
Tax Rate 0%
Interest After Tax $67,925 $56,688 $44,383

Total Interest Paid $216,060

Total Principal Paid $715,000

Scenario D
Year 1 2 3
Beginning Balance $715,000 $604,665 $479,987
Annual Payment $203,285 $203,285 $203,285 $203,285
Interest Before Tax @ 13% $92,950 $78,606 $62,398
Principal Reduction $110,335 $124,678 $140,887
Ending Balance $604,665 $479,987 $339,100
Tax Rate 0%
Interest After Tax $92,950 $78,606 $62,398

Total Interest Paid $301,424

Total Principal Paid $715,000
 4 5
$345,382 $180,522
$197,671 $197,671
$32,811 $17,150 $72,105 $125,566
$164,860 $180,522 $60,176 $137,495
$180,522 $0 $47,114 $150,557
$32,811 $164,860
$21,655 $11,319 $17,150 $180,522

4 5
$325,360 $170,057
$203,285 $203,285
$42,297 $22,107
$160,988 $181,178
$170,057 $0

$27,916 $14,591

4 5
$325,360 $170,057
$186,212 $186,212
$30,909 $16,155
$155,303 $170,057
$170,057 $0

$30,909 $16,155

4 5
$339,100 $179,898
$203,285 $203,285
$44,083 $23,387
$159,202 $179,898
$179,898 $0

$44,083 $23,387
Tax
Cost
n
FG HH
9.50% 9.50%
$759,000 $737,000
5 5
Scenario A
Effective tax rate 34.0%
Pretax cost of debt 9.5%
After-tax cost of debt 6.27%
Faulhaber Gmbh
NPV of loan $484,376
NPV of lease $498,593
IRR of lease 7.13%
Lease advantage over borrowing ($14,217)
Honshu Heavy Industries
NPV of loan $438,036
NPV of lease $478,063
IRR of lease 8.64%
Lease advantage over borrowing ($40,027)
 B C D
34.0% 0.0% 0.0%
13.0% 9.5% 13.0%
8.58% 9.50% 13.00%

$501,993 $686,679 $697,207

$479,073 $714,762 $675,660
7.13% 11.68% 11.68%
$22,920 ($28,083) $21,547

$458,436 $624,641 $640,997

$459,346 $685,330 $647,839
8.64% 13.48% 13.48%
($910) ($60,689) ($6,842)