Question: Q#5 ( 08 marks ) HASF company ltd has two financial options in respect of procuring an equipment for utilizing the same for 5-year costing

Q#5 ( 08 marks ) HASF company ltd has two financial options in respect of procuring an equipment for utilizing the same for 5-year costing Rs1000,000. The two options are

Option # 1 borrows 1,000,000 at an interest rate of 15% the loan is repayable at 5-year end instalments the equipment could be sold at the end of its 5-year economic life at realizable value of RS 100,000.

Option# 2 lease in the asset for a period of 5 years at yearly rental of 330,000 payables at end. The company has to pay income tax 50% and has a discounting rate of 16%. Evaluate the two options and give your opinion

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