QUESTION 3 Initial A-tax DTS PVIFs Present Outlay Lease Foregone @7%Values Avoided Payments Flows 30000(35700 264300 264300 012345 35700(18000(537000935(50210)1 357001[(18000(537000873[(4680)1 35700(18000(537000816〖(43819) (35700(18000(537000.763(40973) 35700(180004537000713(38288) (35700 (35700)066(23776) NPV=$20354 Working A-tax LPs=B-tax LPx1-T 5D00k(1-0.30 =$35700 DTS= An nu alD 30⑩000.20×0.30 Note that the machine is fully depreciated after 5 years. Discoun tRate=B-tax Co stof(I-T) 0.07r7%September 2003 QUESTION 3 t Initial Outlay Avoided A-tax Lease Payments DTS Foregone Net Cash Flows PVIFs @ 7% Present Values 0 300 000 (35 700) 264 300 1 264 300 1 (35 700) (18 000) (53 700) 0.935 (50 210) 2 (35 700) (18 000) (53 700) 0.873 (46 880) 3 (35 700) (18 000) (53 700) 0.816 (43 819) 4 (35 700) (18 000) (53 700) 0.763 (40 973) 5 (35 700) (18 000) (53 700) 0.713 (38 288) 6 (35 700) (35 700) 0.666 (23 776) NPV = $20 354  Lease Workings ( ) ( ) $ 3 57 0 0 $ 5 10 0 0 1- 0 .3 0 A - tax LPs B- tax LP 1- T = =  =  ( ) $ 1 80 0 0 $ 3 0 00 0 0 0 .2 0 0 .3 0 DT S An n u alDep reciati o n Ex p en se T = =   =  Note that the machine is fully depreciated after 5 years. ( ) ( ) 0 .0 7o r 7 % 0 .1 0 1- 0 .3 0 Disco u n t Rate B- tax Co st o f Deb t 1-T = =  = 