(a) Calculate the annual instalment that would be payable under the bank loan. Also calculate how much...
Question:
(a) Calculate the annual instalment that would be payable under the bank loan. Also calculate how much would represent the principal repayment, and how much would represent interest charges, in each of the four years and in total.
(b) What is the before-tax rate of return to the lessor implied by the terms of the proposed lease agreement, and how does it compare with the rate of interest on the bank loan?
(c) Discuss the soundness/relevance of the advice offered by the Company Secretary’s friend.
(d) Discuss the possible advantages to a company like Southee Limited of leasing the equipment rather than acquiring it with a bank loan.
Horngrens Accounting
ISBN: 978-0133855371
10th Canadian edition Volume 1
Authors: Tracie L. Miller-Nobles, Brenda L. Mattison, Ella Mae Matsumura, Carol A. Meissner, Jo-Ann L. Johnston, Peter R. Norwood