Juliet will lease machinery for her business with a cost of capital of 15% per quarter....

Juliet will lease machinery for her business with a cost of capital of 15% per quarter. Her quarterly payments are: $7000 today, $5000 in 3 months, $3000 in 6 months, and $1000 in 9 months. Her tax rate is 15%. What is the present value of her post-tax lease payments?

Expert Solution

Quarter	Pre-tax cash flow	Tax	Post tax cash flow	PV factor	PV of Post tax cash flow
a	b	c=b*15%	d=b-c	e=1/1.15^a	f=d*e
0	$ 7,000	$ 1,050	$ 5,950	1	$ 5,950.00
1	$ 5,000	$ 750	$ 4,250	0.8696	$ 3,695.65
2	$ 3,000	$ 450	$ 2,550	0.7561	$ 1,928.17
3	$ 1,000	$ 150	$ 850	0.6575	$ 558.89
Present value of post-tax cash inflow					$ 12,132.71

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