Donald is in the real estate business. He wants to acquire a BMW 750i for use in his business for three years, and asks you for an analysis...

Annual, end-of-year (for simplicity) lease payments

$18,000

REQUIRED: create Excel spreadsheet depicting discounted cash-flow analyses of the two options to determine if Donald would minimize the present value of his after-tax costs by purchasing or leasing the BMW. In making your calculations, assume the following:

·        Donald is in the 32% marginal tax bracket for all years;

·        Car is 100% business use;

·        January 1 decision date;

·        6% discount rate to compute the present value of future cash flows;

·        If Donald purchases the auto

·        Use the 2018 depreciation limits for passenger autos in Rev Proc 2018-25;

·        He will sell it at the end of 3 years for the estimated residual value quoted above;

·        Hint: you'll need to compute a loan amortization table for the interest deduction;

·        Since we haven't covered this yet, the sale of a business vehicle generates ordinary income/loss.

·        If Donald leases the auto:

·        Use the 2018 lease inclusion amounts for passenger autos in Rev Proc 2018-25;

·        He will return the auto at the end of the lease