Q#1 A company is thinking of installing a Machine it is to decide whether the a machine is to be purchase out right ( 14% borrowings or to be acquired on lease rent basis the firm is in the 50% tax bracket with 10 discount rate the other data available are

Purchase price 20,000,000

Life 6 year

Depreciation straight line method

Salvage value 200,000

Lease charges to be paid in end 400,000

Maintenance expenses to be borne by the lessor

Payment of loan 6 year ended installments of 514,271

You are required to advise the company as to whether it should purchase the machine or acquire it on leasese