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Sir please explain this to me
A lease versus buy evaluation has been performed.the management accountant performed the calculation by taking the saved initial outlay and deducting the tax adjusted lease payment and the lost capital allowances.the accountant discounted the net cash flows at the post tax cost of borrowing.The resultant net present value was positive.
Assuming the calculation is free from arithmetic errors,what would the conclusion for this decision be?
A.lease is better than buy
B.buy is better than lease
C.a further calculation is needed
D.the discount rate was wrong so a conclusion cannot be drawnThe answer is A
if I tray this question.
the accountant is evaluating the benefit of lease as opposed to buy option. so instead of making separate calculation ie lease and then buy. he just put all them together.
as i said the accountant is evaluating benefit of lease as opposed to buy option. therefore if it gives positive figure it means lease option is better and buy option is more expensive.
abokor: Please do not answer questions in this forum because it is Ask the Tutor, and you are not the tutor (but please do help people in the other Paper FM forum 🙂 )
Patience: What abokor has written is correct 🙂
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