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Lease Payments and Cash Flows, No Option to Purchase

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Given the lease payments and terms shown in the following table, determine the yearly after-tax cash outflows for each firm, assuming that lease payments are made at the end of each year and that the firm is in the 40% tax bracket.

Assume that no purchase option exists.
Firm Annual lease payment Term of lease
A $100,000 4 years
B 80,000 14
C 150,000 8
D 60,000 25
E 20,000 10

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Your tutorial is attached in Excel.

Solution provided by:
Carol Sargent, PhD
Education
  • BSc, University of Virginia
  • MSc, University of Virginia
  • PhD, Georgia State University
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