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Encik Suparman, the Supersonic Computers Berhad's president, has found a vendor for the equipment. Datasonic Equipment Berhad has offered to sell Supersonic Computers Berhad the
Encik Suparman, the Supersonic Computers Berhad's president, has found a vendor for the equipment. Datasonic Equipment Berhad has offered to sell Supersonic Computers Berhad the necessary equipment at a price of RM50,000. lt will be completely obsolete in five years and the estimated salvage value is RM5,000. If Encik Suparman purchases the equipment, it will be depreciated using straight-line for five years. Alternatively, the company can lease the equipment from Westland Leasing Enterprise. The lease contract calls for five annual payment of RM15,000 per year, payable at the beginning of the year. Additionally, Supersonic Computers Berhad must make a security deposit of RM 3,000 that will be returned when the lease expires. The company options are to borrow the money at 20% to buy the equipment from Datasonic Equipment Berhad or to lease it from Westland Leasing Enterprise. The company has a marginal tax rate of 35%. From the above information you are required to answer the questions below. a. Briefly explain THREE (3) benefits of leasing to Encik Suparman. b. Recommend Encik Suparman whether he should purchase or lease the equipment
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