new machine of worth Rs. 1.2 million must have to be installed for being competitive in the
Question:
new machine of worth Rs. 1.2 million must have to be installed for being competitive in the market. For the purpose, it approaches a financial instruction to have a 100 percent of loan for the purchase price of the machine which the financial institutions agrees to offer at an interest rate of 13 percent.On the other hand, company has an option to get the machine through a lease financing plan. Considering the information as under:
1.The applicable depreciation rates according to 3-years MACRS class life are 33 percent, 45 percent, 15 percent and 7 percent, respectively.
2.The annual maintenance charges are estimated to be Rs. 80000.
3.The lease terms call for Rs. 300,000 payments at the end of each of the next 4 years.
4.The loan amount is to be fully amortized in equal annual installments payable at the end of each year for 4 years.
5.The tax rate of the company is 45 percent.
6.Under the proposed lease terms, the company should bear the insurance, property taxes, and maintenance expenses.