Term Loans and Leases

							DATA:

Cost of multifaceted cutting machine                  $     100,000
Useful life of the machine (years)                                8
Salvage value                                                20,000

Alternative 1:
Lease term (years)                                                8
Annual lease payment                                  $      16,000

Alternative 2:
Loan term (years)                                                 8
Interest rate                                                 12.0%

MACRS 5-year property depreciation percentages:
  Year 1                                                     20.00%
  Year 2                                                     32.00%
  Year 3                                                     19.20%
  Year 4                                                     11.52%
  Year 5                                                     11.52%
  Year 6                                                      5.76%

Tax rate                                                      35.0%




Schedule of cash flows for the leasing alternative

                                                         Cash          PV of
    End of             Lease              Tax           Outflow        Cash
     Year             Payment           Benefits      after Taxes     Outflows

      0
     1-7
      8



** Total for years 1 - 7




Schedule of debt payments

   End of              Loan            Principal at       Annual
    Year              Payment          End of Year        Interest

        0
      1
      2
      3
      4
      5
      6
      7




Schedule of cash flows for debt alternative

   End of             Debt           Annual       Annual         Tax
    Year            Payment          Interest   Depreciation   Benefits

      0
      1
      2
      3
      4
      5
      6
      7
      8
 After-tax     PV of
Cash Flows   Cash Flows