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Lease vs buy

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Lease vs buy

  • This topic has 1 reply, 2 voices, and was last updated 7 months ago by John Moffat.
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  • June 6, 2022 at 10:17 pm #657601
    Varun.J.Thakkar
    Participant
    • Topics: 47
    • Replies: 50
    • ☆☆

    Which of the following is potentially a benefit to the lessee if they lease as opposed to buy?
    ? Avoiding tax exhaustion
    ? Attracting lease customers that may not have been otherwise possible
    ? Exploiting a low cost of capital
    ? Potential future scrap proceeds

    Dear sir,
    For option C, they have said exploiting a low cost of capital is a potential benefit to purchaser, not the lessee
    Can u pls explain how?
    Thank you

    June 7, 2022 at 8:14 am #657642
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 51555
    • ☆☆☆☆☆

    Buying involves borrowing a large amount of money at the start of the investment, and the lower the cost of money (i.e. cost of capital) is then the more attractive it is to buy.

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