HI Sir
in a Lease or buy question ;
Option 1. The vehicle could be bought using a bank loan with an after tax cost of borrowing of 4% pa
Option 2. It could be leased for a period of 4 years. xxx
The company's after tax weighted average cost of capital is 8%.
in this case what discount factor should be used? 4% or 8%. and why ?
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Discount factor
3y ago#1If deciding which is best (i.e. leasing or buying) then we should discount at 4%.
I explain the reasons for this in my free lectures on lease v buy.
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