Mazoon LLC is planning to purchase a machinery for OMR75,000. The useful life of the machinery is 5 years. The machinery will be sold after 5 years for OMR 5,000. The annual cost of maintenance and repairs is expected to be OMR 5,000. The company wants to insure the machinery with an annual premium of OMR 2,000. The cost of capital for the company is 15%. Alternatively, company has an option to lease the same machinery with a lease rental of OMR 15,000 per year. If company acquires the machinery on lease, the maintenance cost should be incurred by the company and insurance will be borne by the lessor. You are required to suggest the best option for Mazoon LLC.
Mortgages
A mortgage is a formal agreement in which a bank or other financial institution lends cash at interest in return for assuming the title to the debtor's property, on the condition that the obligation is paid in full.
Mortgage
The term "mortgage" is a type of loan that a borrower takes to maintain his house or any form of assets and he agrees to return the amount in a particular period of time to the lender usually in a series of regular equally monthly, quarterly, or half-yearly payments.
Alternatively, company has an option to lease the same machinery with a lease rental of OMR 15,000 per year. If company acquires the machinery on lease, the maintenance cost should be incurred by the company and insurance will be borne by the lessor.
You are required to suggest the best option for Mazoon LLC.
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