Ash Hughes is the managing director of a mining company which has its head office in Perth and its main mine in the Kimberley. On 1 July of the current FBT year the company provided him with a leased car which would have cost $50,000 if purchased (inclusive of a delivery charge of $400 and an initial transfer tax of $600). The lease is for four years. Between 1 July and the following 31 March Ash Hughes expects to travel 23,000 km, of which 18,000 km will be for business purposes. He is entitled to use the car for private purposes at any time. Ash Hughes does not contribute to the running costs of the car. (b) What difference would it make if Ash Hughes traded in his car when the company leased the current car? Assume the trade-in reduced the cost of the car by $12,000. Ash Hughes did this because his employer agreed with him to payout the lease at the end of the four years and give the leased car to him. It is anticipated that the payout figure at the end of the lease would be $15,000. The market value of the car is expected to be $20,000.

Ash Hughes is the managing director of a mining company which has its head office in Perth and its main mine in the Kimberley. On 1 July of the current FBT year the company provided him with a leased car which would have cost $50,000 if purchased (inclusive of a delivery charge of $400 and an initial transfer tax of $600). The lease is for four years. Between 1 July and the following 31 March Ash Hughes expects to travel 23,000 km, of which 18,000 km will be for business purposes. He is entitled to use the car for private purposes at any time. Ash Hughes does not contribute to the running costs of the car. (b) What difference would it make if Ash Hughes traded in his car when the company leased the current car? Assume the trade-in reduced the cost of the car by $12,000. Ash Hughes did this because his employer agreed with him to payout the lease at the end of the four years and give the leased car to him. It is anticipated that the payout figure at the end of the lease would be $15,000. The market value of the car is expected to be $20,000.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 3P

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