- April 25, 2021 at 8:22 am #618709fizaaliMember
- Topics: 50
- Replies: 36
Please help me with the following questions about leasing & buying:
1) Any costs related to the Machine will be borne by the Buyer when we bought the machine BUT not in the case of Leasing because it is the responsibility of Lessor to pay for any maintenance & running costs of the Machine?
2) In case of Lease, we will get the tax saving only on lease rentals because lease payments being tax deductible; BUT in case of Buying, we will get Tax savings on both Maintenance & Service costs plus on the Capital Allowance?
I am also having problems with the timings of Taxation & Capital Allowance in Lease & Buying questions such as:
3) If the Lease rental payments are payable at the start of the year, then we have to put them at [Time 0]. Otherwise, they are usually occurred at the year-end of the financial year [Time 1] if they are not payable at the start of the year?
4) While, Taxation & Capital Allowance is usually occurred at the year-end of financial year [Time 1] BUT it would be put at [Time 2] if they are payable [one year after the end of financial year]?
5) Are these timings for the taxation & capital allowance same for the usual NPV questions (or it is only a special case for Leasing & Buying questions?)
6) Can you please also state what is financial lease & operating lease and what is the difference between them & whether these two leases will change the cash inflows & outflows for the lease calculation in the exam?
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