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I would like to know whether in a lease or buy decision we include any benefits/costs to the company of having that particular asset? i don’t think so such cash flows should be included because they do not relate to the decision of leasing or buying?
In Dec 2009 Q1a no such cash flows were included but i would like to is it because of the way the question has been structured or generally also we do not include any such cash flows in a lease or buy decision? the question is
“Based on financing cash flows only, calculate and determine whether ASOP Co should lease or buy the new technology”.
Dec 2009 Q1 a , b
I think even if we do then we must do it in both the calcualtions of leasing and buying so they are going to be balanced out?
Furthermore for Lease or buy decisions we always use Cost of Borrowing or WACC as well?- Topics: 0
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same question shoaibss asked, can somebody explain
why we are getting tax benefits of licence fees.104,000 x 30% = 31200 (i couldn’t understand this point)
as why we are wholy getting tax benefits of licence fee.- Topics: 9
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@viconly
license fee is tax deductible therefore it results in tax savings at 30%You use WACC when the project is being financed from the overall pool of company funds but if the question specifies that project is being specifically financed by a type of debt you use the cost of that type of funding.
In the ASOP q it specifically states
Quote:it would finance the purchase through a four-year loan paying interest at an annual before-tax rate of 8·6% per year.
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