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Daisytruck is considering the acquisition of a trailer for R 400 000, either on an outright purchase or lease. This will be a 5year lease/contract

Daisytruck is considering the acquisition of a trailer for R 400 000, either on an outright purchase or lease. This will be a 5year lease/contract and it will require a down payment of R80 000 and further payments of R80 000 per year at the end of each year. If the trailer is owned, the service and maintenance charges will be R25 000 p.a. but if the trailer is leased this charge is carried by the lessor. The salvage value of the trailer in 5 years time is expected to be R 50 000. The company uses the straight-line method of depreciation. The prevailing tax rate is 30% and the after tax cost of debt is 10%. Required: 1.1 Calculate

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