A company is considering whether to buy a new machine at a cost of $100,000 or alternatively
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A company is considering whether to buy a new machine at a cost of $100,000 or alternatively to lease it for $35,000 p.a. (lease payments payable at the start of each year). Buying it will involve borrowing money at an after tax interest cost of 7% p.a. If the machine is bought, it will be bought on the last day of the current financial year. The machine will be needed for 4 years, and (if purchased) will have a scrap value $10,000 after 4 years. Corporation Tax is 30% (payable one year after the end of the financial year). Capital Allowances are 25% (reducing balance). Should the machine be leased or purchased?
Related Book For
Accounting For Managers Interpreting Accounting Information for Decision Making
ISBN: 978-1119979678
4th edition
Authors: Paul M. Collier
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