ASOP Co December 2009

The saving in operating cost is taken into account in part (b). It has been ignored in part (a) simply because they make the saving whether they lease or buy. The operating costs will be the same and so in part (a) we only look at the difference in the two financing flows. Again, in part (a) because we are simply comparing leasing with buying, we discount at the cost of the loan finance. This is all explained in the free lectures on lease and buy.