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Casso limited has an option to purchase new car for the use from a bank on loan

PROBLEM –DECISION MAKING ABOUT LOAN& LEASE

Casso limited has an option to purchase new car for the use from a bank on loan for Rs. 100,000 with 16% interest payable annually and the principal is repayable in full at the end of 4 years. Alternatively, the car could beleased for 4 years, with the following terms:

1. Down payment Rs. 22,000

2. Four annual payments Rs. 25,000

3. Fair value of the asset Rs. 100,000

4. Implicitrate of interest 10%

5. Rental isto be paid at the beginning of the year.

Required:

Find which option is more suitable for the company.

Apr 25 2018 View more View Less

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