Sahyadri papers ltd. Is planning to install a generator. The fnance manager has been asked to evaluate the alternative either to purchase or axuire in lease basis
Buying Initial cost Residual value
500000 160000
Leasing Annual lease rentals Residual value
150000 90000
Depreciation at 20% p.a on written down value. Corporate tax rate is 40% after tax cost of debt is 14%. Evaluate the lease or buy decision.
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