Question 2 Talam Bhd. wants to purchase machinery worth RM3,400,000. It will be completely obsolete in...

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Question 2 Talam Bhd. wants to purchase machinery worth RM3,400,000. It will be completely obsolete in five years and the estimated salvage value is zero. If the company purchases the machine, it will be depreciated using straight-line basis for five years. The company options are to borrow the money at 28% or to lease the machine from Amtel Leasing Bhd. If the company lease, the payments will be RM1,200,000 per year, payable at the end of each of the next six years. The tax rate is 26%. Required: a. Calculate the Net Present Value of leasing. Should Talam Bhd. lease or buy the machine? (14 Marks) b. Calculate the maximum lease payment that Talam Bhd. would accept to lease the machine from Amtel Leasing Bhd. c. Leasing is a zero-sum game. Discuss. (7 Marks) (4 Marks) (Total: 25 Marks) Question 2 Talam Bhd. wants to purchase machinery worth RM3,400,000. It will be completely obsolete in five years and the estimated salvage value is zero. If the company purchases the machine, it will be depreciated using straight-line basis for five years. The company options are to borrow the money at 28% or to lease the machine from Amtel Leasing Bhd. If the company lease, the payments will be RM1,200,000 per year, payable at the end of each of the next six years. The tax rate is 26%. Required: a. Calculate the Net Present Value of leasing. Should Talam Bhd. lease or buy the machine? (14 Marks) b. Calculate the maximum lease payment that Talam Bhd. would accept to lease the machine from Amtel Leasing Bhd. c. Leasing is a zero-sum game. Discuss. (7 Marks) (4 Marks) (Total: 25 Marks)

Answer rating: 100% (QA)

a To calculate the Net Present Value NPV of leasing we need to discount the lease payments and compa... View the full answer