Question
Question 3. Marks 16 Jack Watson is planning purchase new vehicle on lease arrangement and below mentioned is the detail on vehicle and associated costs
Question 3. Marks 16
Jack Watson is planning purchase new vehicle on lease arrangement and below mentioned is the detail on vehicle and associated costs
Cost of vehicle Rs. 1,500,000
Insurance as %age of cost for 5 years 0.5%
Registration 0.20% of the cost of vehicle
Road taxes Rs. 40,000
Adjustable withholding income tax 1.00% of the cost of vehicle
Down payment %age of cost 7.5%
Items (iii) to (vi) are not covered under financing arrangements and there are 2 financing options available as mentioned under:
Choice 1
Interest rate - 8% Lease period - 5 years
Instalment payment period - Monthly
Choice 2
Interest rate - 6.5% Lease period - 7 years
Instalment payment period Annual
Required:
Calculate amount that needs to be financed.
Find out fixed instalment amount that needs to be paid under each option.
Prepare lease repayment schedule for both options.
Based on total cost of lease which option should Jack Watson should opt for.
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