Lease Financing Question A Company Is Thinking Of Installing A Computer It Is To Dec 2814741

/in /by

LEASE FINANCING : QUESTION : A Company is thinking of installing a computer. It is to decide whether the computer is to be purchased outright (through 14% borrowings) or to be acquired on lease rental basis. The Company is in 50% tax bracket. The other data available is : Document Preview:

LEASE FINANCING : QUESTION : A Company is thinking of installing a computer. It is to decide whether the computer is to be purchased outright (through 14% borrowings) or to be acquired on lease rental basis. The Company is in 50% tax bracket. The other data available is : Purchase of computer : Purchase price$ 2000000 Annual maintenance$ 50000 (to be paid in advance) Expected economic useful life6 years DepriciationStraight Line Method Salvage value200000 Leasing of Computer : Lease charges $ 450000 (to be paid in advance) Maintenance expensesTo be borne by Lessor. Payment of Loan6 Year end equal instalments of $ 514271.00 You are required to advise the company as to whether it should purchase the computer or acquire it on lease.

Attachments:

question-1.docx