| Course | GF599 Graduate Capstone in Finance |
|---|---|
| Unit | Unit 7 |
| Paper type | Interim findings report |
| Length | About 890 words, 6 pages double-spaced |
| Format | APA 7 student paper |
| School | Purdue University Global |
| Program | MS in Finance |
| Updated | October 2026 |
Free sample paper for GF599 Unit 7
The Buildings Do the Work: A Unit 7 Interim Findings Report on the Tollbrook Sale-Leaseback
[Student Name]
Purdue University Global
GF599: Graduate Capstone in Finance
Unit 7 Interim Findings Report
[Instructor Name]
[Date]
Tollbrook Tire and Service and all figures are composite and illustrative, computed in the project's model version 0.6; source codes refer to the Unit 5 register; the sources cited are real.
Exhibit 1: The Two Routes Side by Side
Route A, sell and lease back. Price $11,200,000 (S1). Less a selling cost of $280,000 and tax of $655,000 on a $2,620,000 gain at 25 percent (S3, S6). Net cash today: $10,265,000. Proceeds retire the $6,400,000 revolving balance and leave $3,865,000 of cash.
Annual cost: rent of $756,000 in year one, rising 2 percent a year to about $998,000 in year fifteen (S1), or $567,000 to $748,000 after tax. Lost depreciation shield: $50,000 a year (S3, S6). At the end of year fifteen the chain owns nothing.
Route B, keep and borrow. A mortgage of $5,460,000, 65 percent of an estimated $8,400,000 value for the five strongest buildings, at 6.90 percent fixed for ten years with a twenty-five-year amortization (S5). Proceeds cut the revolving balance from $6,400,000 to $940,000. The chain keeps all seven buildings, whose year-fifteen worth the model sets near $15.07 million if values track rents.
Sources: S1, S3, S5, S6, S7. Derived: tax on gain, after-tax rent, end value.
Exhibit 2: Where the Gap Comes From
Discounting Route A's cash flows relative to Route B at the after-tax mortgage rate of 5.175 percent gives four pieces:
1. Cash received today: plus $10,265,000.
2. After-tax rent, years one to fifteen: minus $6,582,000 in present value.
3. Lost depreciation shield: minus $513,000.
4. Buildings given up at year fifteen, after tax: minus $5,926,000.
Net: Route A leaves the chain about $2,756,000 worse off.
The rent alone costs less in present value than the cash the sale brings in; it is the buildings the chain hands over in year fifteen, worth almost $5,930,000 today, that make selling the more expensive way to borrow.
This decomposition explains why the investor's offer looks attractive at first reading. Over fifteen years the rent is paid by a chain that receives $10,265,000 today, and if the end value is left out the sale seems to come out ahead by about $3,170,000. The cost of selling sits almost entirely in a cash flow that arrives fifteen years from now and that a lease-or-buy comparison must still include (Myers et al., 1976).
Exhibit 3: Covenant Effects
The credit agreement measures fixed-charge coverage as operating earnings with rent added back, divided by interest, rent and scheduled principal (S4). Last year's figure was 1.85, against a minimum of 1.25.
1. Today: 1.85.
2. Route A: 1.67. Interest on the revolving line disappears, but $756,000 of new rent enters the fixed charges.
3. Route B: 1.80. Interest on the new mortgage and its principal replace most of the revolver interest.
Both routes satisfy the covenant comfortably. Route A weakens the ratio more, and it also adds a fifteen-year lease liability to the balance sheet under current accounting rules (Financial Accounting Standards Board, 2016), which the bank will see when it reviews the line.
How the Result Responds to the Inputs Tested So Far
Two sensitivity runs were completed after the Unit 6 seminar. The first replaces the investor's single price with the band the cap-rate survey supports (S7). At a 6.5 percent cap rate the price would be about $11,630,000 and the sale-leaseback would cost 7.24 percent after tax; at 7.5 percent the price would be about $10,080,000 and the cost 8.47 percent. The present-value disadvantage of selling ranges from $2,430,000 to $3,600,000 across the band.
The second varies the blended tax rate from 21 to 30 percent. A lower rate makes the lost depreciation and the tax on the gain smaller but also raises the after-tax cost of the mortgage. At 21 percent the sale-leaseback costs 7.82 percent against 5.45 percent for the mortgage; at 30 percent it costs 7.24 percent against 4.83 percent. The gap narrows only slightly at either end, so the accountant's exact rate does not decide the question.
What This Means So Far
Selling is the more expensive way to raise money against these buildings, unless their value falls sharply over the next fifteen years. Tollbrook is not a constrained borrower: its bank will lend against the five strongest buildings, and the chain's coverage is strong. Leasing can make sense for firms that cannot borrow on good terms, because a lessor can recover its asset more easily than a lender can (Eisfeldt & Rampini, 2009), but that advantage matters little to a chain with a willing lender.
Open Items
1. Firm mortgage terms. The 6.90 percent rate is an indication (S5). A firm term sheet could move it.
2. Building values in year fifteen. The base case assumes values grow with rents. The break-even decline will be reported in Unit 8.
3. The two weakest sites. Their sale alone will be tested as a sensitivity case, flagged as needing its own offer.
4. Renewal options. The lease's four five-year renewals are not valued in the model.
Next Steps
Unit 8 will report how far each input must move to reverse the answer, and state the claims the evidence will not support.
References
Eisfeldt, A. L., & Rampini, A. A. (2009). Leasing, ability to repossess, and debt capacity. The Review of Financial Studies, 22(4), 1621-1657. https://doi.org/10.1093/rfs/hhn026
Financial Accounting Standards Board. (2016). Leases (Topic 842) (Accounting Standards Update No. 2016-02).
Myers, S. C., Dill, D. A., & Bautista, A. J. (1976). Valuation of financial lease contracts. The Journal of Finance, 31(3), 799-819. https://doi.org/10.1111/j.1540-6261.1976.tb01924.x
What the GF599 Unit 7 assignment asks for
Unit 7 of GF599 asks for an interim report that states what the analysis shows so far and what it still needs. Present the main result early, in numbers. Lay out the alternatives side by side in an exhibit, with the source of each figure noted. Then break the result into its parts so the reader can see which input carries the answer. Report any constraints that could rule an option out, such as loan covenants. Include the sensitivity tests already run and what they showed. Interpret the findings in light of the research, but keep the verdict provisional where inputs are still uncertain. Close with a numbered list of open items and the next steps that will resolve them. Exhibits should be readable on their own, with source codes beneath them. Cite lease-valuation research, the accounting standard on leases and work on leasing and debt capacity in APA 7.
Inside the GF599 Unit 7 example
Exhibit 1 sets Route A, selling for $10,265,000 net and paying rent from $756,000 to about $998,000, beside Route B, a $5.46 million mortgage on five buildings that cuts the revolver to $940,000. Exhibit 2 breaks the result into four pieces: $10,265,000 received, $6,582,000 of after-tax rent, $513,000 of lost shield and $5,926,000 of buildings given up. The highlighted sentence identifies the buildings as the deciding cost, and a paragraph citing Myers, Dill and Bautista explains why the offer looks attractive without them. Exhibit 3 reports coverage of 1.85 today, 1.67 under the lease and 1.80 with the mortgage, noting Topic 842's balance-sheet effect. A sensitivity section reports the price band and the 21 to 30 percent tax range. Eisfeldt and Rampini frame why leasing matters less for an unconstrained borrower. Four open items and next steps close the report.
Where the points sit in the GF599 Unit 7 rubric
The GF599 rubric rewards an interim report that is clear about what it knows and what it does not. Instructors look for a headline result in numbers, supported by exhibits that reconcile with one another. The decomposition matters a great deal, since it reveals whether the student sees why the answer comes out as it does, and it points directly at the limitation that matters most. Constraints such as covenants earn credit when they are measured against the actual agreement. Reporting completed sensitivity tests demonstrates progress since the seminar. The tone is graded: a verdict that sounds final before the open items are resolved overstates the evidence, while one buried in qualifications fails to inform. A clear list of open items with next steps shows the project is under control. Lease-valuation research, the FASB standard and a study of leasing and debt capacity, listed in APA 7, frame how the result is read.
Common GF599 Unit 7 mistakes, and how to avoid them
GF599 Unit 7 reports often present a single number with no breakdown, so the reader cannot tell which assumption drives it. Others bury the result under methodology already covered in Unit 4. Exhibits frequently lack source notes or fail to reconcile, such as proceeds that do not match the price less costs and tax. Covenants are sometimes ignored or described without computing the ratio. Some reports present sensitivity results as if they were the main finding, or skip them entirely. The tone often swings to extremes, either declaring the question settled or refusing to state a result. Open items are left vague. Lead with the result, show the routes side by side, decompose the difference, test any constraint, report the sensitivity runs, interpret briefly with the research, and end with a numbered list of what remains and how each item will be closed.
Get a GF599 Unit 7 example written to your instructions
Share the results you have so far, the questions still open and your Unit 7 instructions with the rubric. The interim report you receive states a provisional verdict, identifies the input carrying it, separates main from secondary findings and proposes any change of course. There is no charge for a first sample; allow 24-48h. The paper above is an original model document written by our desk, not a submitted student paper and not an official Purdue University Global document.
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GF599 Unit 7 questions, answered
How confident should an interim verdict sound?
As confident as the evidence allows and no more. The sample calls its result provisional, then explains why it is unlikely to reverse: the gap exceeds two points after tax, and each open item would move it by less. Words like proves or clearly usually overstate a finding at this stage of a project.
Should the report show the full cash-flow schedule?
An exhibit summarizing the two routes belongs in the body, with the year-by-year schedule in an appendix. Graders check that summary figures, such as the 10.27 million of after-tax proceeds, reconcile to the schedule. A body filled with fifteen columns of numbers usually buries the verdict the reader came for.
Where can I find a free GF599 Unit 7 sample paper?
This page carries a full GF599 Unit 7 interim findings report on a sale-leaseback, with the two routes side by side, a four-part decomposition, covenant effects, early sensitivity results, open items and APA 7 references.
What drives the result in GF599 Unit 7?
The buildings the chain would give up at the end of the lease. Their after-tax value, about $5.93 million in present terms, is nearly as large as the rent's cost, and without it the sale would appear about $3.17 million better than borrowing.
Do both routes satisfy the loan covenant?
Yes. Fixed-charge coverage is 1.85 today against a 1.25 minimum. It would be 1.67 under the lease, because new rent enters the fixed charges, and 1.80 with the mortgage.