4. Calculate the net cash flow of lease, given lease payments of $10,500; lease payment tax benefits of $4,150; and CCA tax shield of $2,200
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- (1) Assume that the lease payments were actually 280,000 per year, that Consolidated Leasing is also in the 25% tax bracket, and that it also forecasts a 200,000 residual value. Also, to furnish the maintenance support, it would have to purchase a maintenance contract from the manufacturer at the same 20,000 annual cost, again paid in advance. Consolidated Leasing can obtain an expected 10% pre-tax return on investments of similar risk. What are its NPV and IRR of leasing under these conditions? (2) What do you think the lessors NPV would be if the lease payment were set at 260,000 per year? (Hint: The lessors cash flows would be a mirror image of the lessees cash flows.)Lease versus Buy Consider the data in Problem 19-1. Assume that RCs tax rate is 40% and that the equipments depreciation would be 100 per year. If the company leased the asset on a 2-year lease, the payment would be 110 at the beginning of each year. If RC borrowed and bought, the bank would charge 10% interest on the loan. In either case, the equipment is worth nothing after 2 years and will be discarded. Should RC lease or buy the equipment?3. What is the total financial or interest revenue over the lease term? ₱ 1,439,100 ₱ 1,379,156 ₱ 1,558,538 ₱ 1,498,594 4. How much is the gross investment that should be initially recognized as lease receivable? ₱ 4,000,000 ₱ 3,840,150 ₱ 3,000,000 ₱ 4,140,056
- What is the gross investment in the lease? *a. 5,000,000b. 6,200,000c. 3,800,000d. 5,744,000Calculate the interest deduction on an income tax return plus the required down payment using a 1st 2nd and 3rd mortgage on an investment property for the following amounts: $785,000, $925,000.00, $1,380,000.00, $1,600,000.00, $2,400,000.00. Note: 3rd mortgage interest is 11%An investor owns a property that produces an NOI of $110,000 and has an annual debt service of $70,000 and the forecast of cost recovery and interest deductions are $38,427 and $58,593 respectively. The investor’s marginal tax rate is 35 percent. The investor’s projected cash flow after taxes is: A. $30,000 B. $35,457 C. $43,256 D. $25,821
- Each of the three independent situations below describes a finance lease in which annual lease payments are payable at the end of each year. The lessee is aware of the lessor’s implicit rate of return. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Situation 1 2 3 Lease term (years) 12 20 3 Lessor's rate of return (known by lessee) 10% 8% 11% Lessee's incremental borrowing rate 11% 9% 10% Fair value of lease asset $650,000 $1,005,000 $210,000 Required:a. & b. Determine the amount of the annual lease payments as calculated by the lessor and the amount the lessee would record as a right-of-use asset and a lease liability, for each of the above situations. (Round your answers to the nearest whole dollar.)Please answer all parts. Question 1) Purchase price: $395,000 Mortgage Amount: 80% LTV, 30 year fixed at 5% PAID ANNUALLY. Loan Origination expenses: 3% of total loan amount. NOI: $48,000 / Year Required return on investment (levered): 11% Expected price appreciation: 5% per year Selling Expenses: 4% Expected holding period: 2 Years What is the levered cash flow at time 0? What is the levered cash flow at time 1? What is the before tax equity reversion (BTER)? What is the total levered cash flow for time 2? What is the levered IRR?4. How much is the gross investment that should be initially recognized as lease receivable? ₱ 4,000,000 ₱ 4,140,056 ₱ 3,840,150 ₱ 3,000,000
- On March 31, 20x1, TRUST CO. (customer)enters into a 4 -year lease of equipment with FAITH CO. ( Supplier). The annual rent is P220,000, payable at the end of each year . The equipment has a remaining useful life of 10 years. The interest rate implicit in the lease is 10% while the lessee's incremental borrowing rate is 12%. The relevant value factors are as follows: PV of an ordinary annuity of P1@10%, n=4 ...... 3.16987 PV of an ordinary annuity of P1@12%, n=4 ....... 3.03735 How much is the lease liability to be recognized by TRUST CO. on initial recognition? A. P880,000 B. P697,371 C. P523,029 D. P702,345On March 31, 20x1, TRUST CO. (customer)enters into a 4 -year lease of equipment with FAITH CO. ( Supplier). The annual rent is P220,000, payable at the end of each year . The equipment has a remaining useful life of 10 years. The interest rate implicit in the lease is 10% while the lessee's incremental borrowing rate is 12%. The relevant value factors are as follows: PV of an ordinary annuity of P1@10%, n=4 ...... 3.16987 PV of an ordinary annuity of P1@12%, n=4 ....... 3.03735 1.How much is the lease liability to be recognized by TRUST CO. on initial recognition? 2.Assume that the lease in No. 2 is a A)finance lease. How much is the net investment in the lease to be recognized by FAITH CO. on initial recognition? B) Assume that the lease is an operating lease . How much is the lease ( rent) income in 20x2?The leasing company has offered to finance the entire leasing deal at 2% annual interest rate. How does this change the value of the leasing cashflow from the corporate-financed 4% option?
