Replace factory machinery with new equipment costing £2,000,000 which has a 20 year life. The Board are concerned about raising more debt at its 5.0% per annum cost, but the machinery supplier has offered to lease us the machinery for just £190,500 payable annually in advance for 15 years.

Establish if the lease really is more attractive than the 5% loan by extracting the interest rate implicit in the lease

Answer rating: 100% (QA)

The implicit interest rate in the lease is 1181 ... View the full answer