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Levels Tought:
Elementary,Middle School,High School,College,University,PHD
| Teaching Since: | May 2017 |
| Last Sign in: | 402 Weeks Ago, 5 Days Ago |
| Questions Answered: | 66690 |
| Tutorials Posted: | 66688 |
MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
Example
Evaluation of leasing versus borrowing to buy
Dadd Ltd is trying to decide whether to lease or to buy a machine with a useful life of six years. Dadd could borrow £90 000 to buy the machine or lease it for annual lease rentals of £20 000 per year for six years, payable at the start of each year. If the machine is bought, maintenance costs of £1000 per year will be incurred. These costs will not be incurred if the machine is leased. Dadd pays profit tax at a rate of 30 per cent one year in arrears and can claim capital allowances on a 25 per cent reducing balance basis. The company’s before-tax cost of borrowing is 10 per cent. Should Dadd lease or buy the machine?
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