QUESTION 2 A-tax DTS A-tax PVIFs Present Salva Cash Payments Value Flows oregon o85000(7700 77300 7700) (10250)0926(9492) (7700)(25 (102500857(8784) (7700(25 (7700) 2550) (10250)0735(7534) (2550 (102500681(6980 (77 2550 (10250)0630(6458 (7700)(2550 (10250)0583(5976) (7700) 2550) (10250)0540(5535) (7700)_(2550) (10250)0500(5125) 10 (250)(3500)(6050)0463(2801) NPV=$10476 Lea Working tax lPs=B- tax lp×(-T) 1D00k(1-0.30 7700 S=An n u alDep =$2550 A-tax Sv=B-taxSVx(1-T) (1-0.30 $3500 Disco un trate=b tofDebtx(l-T) 0.08r8%September 2003 QUESTION 2 t Initial Outlay Avoided A-tax Lease Payments DTS Foregone A-tax Salvage Value Foregone Net Cash Flows PVIFs @ 8% Present Values 0 85000 (7 700) 77300 1 77300 1 (7 700) (2550) (10250) 0.926 (9492) 2 (7 700) (2550) (10250) 0.857 (8784) 3 (7 700) (2550) (10250) 0.794 (8139) 4 (7 700) (2550) (10250) 0.735 (7534) 5 (7 700) (2550) (10250) 0.681 (6980) 6 (7 700) (2550) (10250) 0.630 (6458) 7 (7 700) (2550) (10250) 0.583 (5976) 8 (7 700) (2550) (10250) 0.540 (5535) 9 (7 700) (2550) (10250) 0.500 (5125) 10 (2550) (3500) (6050) 0.463 (2801) NPV = $10 476  Lease Workings ( ) ( ) $ 77 0 0 $ 1 10 0 0 1- 0 .3 0 A - tax LPs B- tax LP 1- T = =  =  ( ) $ 25 5 0 $ 8 50 0 0 1 0 0 .3 0 DT S An n u alDep reciati o n Ex p en se T = =   =  ( ) ( ) $ 35 0 0 $ 50 0 0 1- 0 .3 0 A - tax S V B- tax S V 1- T = =  =  ( ) ( ) 0 .0 8o r 8 % 0 .1 1 4 3 1- 0 .3 0 Disco u n t Rate B- tax Co st o f Deb t 1-T = =  = 