CIMA F3 Lease or buy
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3.13 BPP
a business has decided to install a new mechine. $50K , useful life five years with trade in value 10k at the end of the fifth year.
the business could purchase the machine for cash, using bank loan facilities – cost of debt 9% after tax.
the tax rate is 30%. and will be able to claim tax depreciation allowance in year 1. tax is payable with no delay.
what is the PV of the purchase cost.
Answer : 31700.
(-50k X 1) + (7k x 0.650 ) + year 1 – 100% Tax saving (50×30% X 0.917).
1thing i am confuse are its should expense off the tax saving for 10k trade in value. by 10k x 0.3 x 0.650 = 1.95k
and my answer is 31700 + 1950 = 33650 cost?
Hi leature. please help on this. thank you
My mistake. 7k already included the tax deduction.
Why does the lease start at T0 and not at T1?
Ignore me i get it now 馃檪