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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 2 months ago by John Moffat.
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  • Author
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  • March 19, 2023 at 2:52 pm #681524
    Claire91
    Participant
    • Topics: 7
    • Replies: 0
    • ☆

    Dear Tutor,

    I would like to ask a question about example 3 in Chapter 9 ( Lease versus Buy).

    The question mentioned : “ Buying it will involve borrowing money at an after tax interest cost of 7%”.

    In the answer you provided, during the calculation i do not see any interest cost ( for borrowing the money from the bank) . But instead of 7% was used as discount factor.

    Q1: Why there is no interest from borrowing in the calculation?

    Thank you

    March 20, 2023 at 8:46 am #681576
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 52529
    • ☆☆☆☆☆

    The whole point of discounting always is to account for the interest cost – that is the only reason we ever discount.

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