please answer within 30 minutes. Urgent. small company has to lease a truck. The companycan either pay the lease costs up-front for threeyears, or it can pay it in annual payments at the startof each year. If the up-front cost is £24,000 for 3years, or the alternative is an annual cost of £8000(payable at the beginning of each year), determinewhether it is best to pay up-front or by yearlypayments, over a 3-year period. You will need totake into account that the inflation rate is 5% peryear and the annual payment scheme will besubject to inflation rate rises. Also the bank interestrate is 3%. To do this you will need to determine theNet Present Value (NPV) costs of each method ofpayment.What would happen if the bank interest rateincreased to 9%? Would this affect your decision?The formula for NPV is:X (1+r)tWhere X is the amount to be adjusted, r is theinterest rate as a fraction and t is the time period.

Concept of lease accounting: Lease refers to a contract or agreement between the lessor and lessee…

Answered: can either pay the lease costs up-front…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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