Question

Explain why the aftertax borrowing rate is the appropriate discount rate to use in lease evaluation. Refer to the following example for Questions 10 through 12: In April 2014, International Lease Finance Corporation (ILFC) announced a deal to purchase eight Airbus A330-200 and A350-900 passenger aircraft. ILFC then signed a long-term lease contract on the planes with Azul Linhas Aéreas Brasileiras to be used for flights from Brazil to the United States.

   Explain why the aftertax borrowing rate is the appropriate discount rate to use in lease evaluation.
Refer to the following example for Questions 10 through 12:

In April 2014, International Lease Finance Corporation (ILFC) announced a deal to purchase eight Airbus A330-200 and A350-900 passenger aircraft. ILFC then signed a long-term lease contract on the planes with Azul Linhas Aéreas Brasileiras to be used for flights from Brazil to the United States.

Fundamentals of Corporate Finance

Stephen A. Ross;… 11th Edition

Chapter 27, Problem 9

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Step 1

The aftertax borrowing rate is the interest rate that a company pays on its debt after taking into account any tax benefits or deductions. It is the effective cost of borrowing for the company. In the case of lease evaluation, the aftertax borrowing rate is the Show more…

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Explain why the aftertax borrowing rate is the appropriate discount rate to use in lease evaluation. Refer to the following example for Questions 10 through 12: In April 2014, International Lease Finance Corporation (ILFC) announced a deal to purchase eight Airbus A330-200 and A350-900 passenger aircraft. ILFC then signed a long-term lease contract on the planes with Azul Linhas Aéreas Brasileiras to be used for flights from Brazil to the United States.

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