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An investment bank has sought your advise on their plan to install Bloomberg Terminals in their new offices. They have the below three option They

An investment bank has sought your advise on their plan to install Bloomberg Terminals in their new offices. They have the below three option
They can lease the Terminals for 10,000 growing at 3% a year for 5 years. The lease expenses would be treated as operating and therefore would be tax-deductible.
They can buy the Terminals for 40,000 and depreciate it over 4 years, which is the expected project life.
The third option is to buy the Terminals for 40,000 and expense it immediately. The Terminals will still have an expected life of 4 years.
If the main rate of corporation tax is 25% and the cost of capital is 10%, estimate the equivalent annual cost of each option.

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