5 / 6 O 138% QUESTION 4 (20 Marks) REQUIRED: Consider the information given further below and answer the two questions that follow: 4.1 Use the Net Advantage of Leasing (NAL) method to determine whether ElectronicKings Ltd should borrow money to buy the equipment or to lease the equipment. Your answer must include: a) Amortisation schedule; b) After-tax outflows for borrowing and buying the equipment and c) Comparison of the cash flows associated with leasing versus the option of borrowing and buying. (18 marks) 5 / 6 138% ( ) ) 4.2 State two tax implications a business should consider when considering financial leases. (2 marks) INFORMATION: Electronickings Ltd wants to purchase new equipment for an advanced smart television they wish to manufacture. The machine will cost R750 000. It is expected to be useful for a period of 3 years. ElectronicKings Ltd has the option of borrowing the money from a financial institution at a cost of 20% or alternatively to lease the equipment. In the case of leasing, the payments will be R375 000 at the end of each of the next 3 years. If the equipment is financed it will have to take out a maintenance contract for R25 000 per year. The tax rate that applies to Electronickings Ltd is 30%. Type here to search 0 CD