complete question XYZ Builders Ltd. need to acquire the use of a crane for their construction business and are considering buying or leasing a crane. The crane costs Rs.10000 subject to SLM depreciation with salvage value 0 at the end of 5 years. In contrast, the lease rent is Rs.3000 p.a. to be paid in advance each year for 5 years.XYZ Builders ltd can raise debt at 20% payable in equal annual instalments, each

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter19: Lease And Intermediate-term Financing
Section: Chapter Questions
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XYZ Builders Ltd. need to acquire the use of a crane for their construction business and are considering buying or leasing a crane. The crane costs Rs.10000 subject to SLM depreciation with salvage value 0 at the end of 5 years. In contrast, the lease rent is Rs.3000 p.a. to be paid in advance each year for 5 years.XYZ Builders ltd can raise debt at 20% payable in equal annual instalments, each instalment due at the beginning of the year. Tax applicable in 35%. Should it lease or buy the asset?

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