QUESTION FOUR $($Compulsory$)$

Finance Leasing Company $($FLC$)$ wants to lease a computerized milling machine which costs K$1,400,000$ to purchase. The terms of the lease call for K$70,000$ quarterly payments payable in advance for $6$ years, FLC assumes the asset will have a residual value of $K400,000.$

a$.$ Given the above information, calculate R or the return to FLC$.$

$(10$ Marks$)$

b$.$ What factors does the lessor's return depend on$?$ Explain in detail.

$(5$ Marks$)$

c$.$ Supposing that FLC above wants a $12$ percent return, and that the asset continues to cost K$1,400,000$ and has an expected residual value of $K400,000,$ calculate the necessary lease payment $($LP$)$ to the nearest Kwacha.

$($Total Marks $25)$