Sultan J Limited is considering the lease of equipment which has a purchase price of KShs. 450,000 the equipment has an estimated life of 5 years and a salvage value of KShs. 5,000. The company uses 25% reducing balance on cost as depreciation. The lease rental per year is KShs. 100,000. Assume that the company's corporate tax is 30%. If the before tax borrowing rate for the company is 16%. Should the company lease the equipment? (Hint: Use the Net Advantage Method) (12 Marks)

Answer rating: 100% (QA)

The detailed answer for the above question is provided below Answer C ... View the full answer