b. Miss Liza's cousin, Abu Bakar is a financial manager for Fish Curry Berhad (FCB), has been asked to perform a lease-versus-buy analysis on a new computer system. The computer costs RM1,200,000, and, if it is purchased, FCB could obtain a term loan for the full amount at a 10% cost. The computer is classified as special purpose, it will be depreciated using straight-line for six years. After 6 years, the computer will be sold, and Abu Bakar's best estimate of its residual value at that time is RM125,000. As an alternative, Alexis Leasing is willing to write a 6-year lease on the computer, including maintenance, for payment of RM340,000 at the beginning of each year. FCB marginal tax rate is 40%. From the above information, help Abu Bakar conduct his analysis by preparing the Cash Flows Analysis, showing clearly the Net Advantage to Leasing (NAL). Based on the NAL, should FCB lease or buy the computer?

b. Miss Liza's cousin, Abu Bakar is a financial manager for Fish Curry Berhad (FCB), has been asked to perform a lease-versus-buy analysis on a new computer system. The computer costs RM1,200,000, and, if it is purchased, FCB could obtain a term loan for the full amount at a 10% cost. The computer is classified as special purpose, it will be depreciated using straight-line for six years. After 6 years, the computer will be sold, and Abu Bakar's best estimate of its residual value at that time is RM125,000. As an alternative, Alexis Leasing is willing to write a 6-year lease on the computer, including maintenance, for payment of RM340,000 at the beginning of each year. FCB marginal tax rate is 40%. From the above information, help Abu Bakar conduct his analysis by preparing the Cash Flows Analysis, showing clearly the Net Advantage to Leasing (NAL). Based on the NAL, should FCB lease or buy the computer?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter19: Lease Financing

Section: Chapter Questions

Problem 1P: Reynolds Construction (RC) needs a piece of equipment that costs 200. RC can either lease the...

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