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PLEASE DO NOT USE SHORTCUTS AND FORMULAS ONLY USE TABULAR METHOD COMPULSORILY AND WILL THUMBS UP YOUR ANSWER THANKYOU Problem 4.2: Lease versus Purchase Decision
PLEASE DO NOT USE SHORTCUTS AND FORMULAS ONLY USE TABULAR METHOD COMPULSORILY AND WILL THUMBS UP YOUR ANSWER THANKYOU
Problem 4.2: Lease versus Purchase Decision The Nirmal Company is faced with the decision of whether it should purchase or lease a new computer. The computer can be leased on five year contract for Rs 6,000 a year or it can be purchased for Rs 25,000. The salvage value of the computer after five years is Rs 2,000. The company uses straight-line depreciation. The discount rate applied is its after-tax cost of debt. The company can borrow at 15 percent and has a 40 percent marginal tax rate and a 12 percent cost of capital. a. b. C. Calculate the cost of leasing. Calculate the cost of purchasing. Should the firm lease or purchase the computer
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