A company is undertaking a lease-or-buy evaluation, using the post-tax cost of bank borrowing as the discount rate.
Details of the two alternatives are as follows:
Buy option:
• To be financed by a bank loan
• Tax depreciation allowances are available on a reducing-balance basis
• Assets depreciated on a straight-line basis
Lease option:
• Finance lease
• Maintenance to be paid by the lessee
• Tax relief available on interest payments and book depreciation
Which THREE of the following are relevant cashflows in the lease-or-buy appraisal?
Submit