PRIN.OF CORPORATE FINANCE
PRIN.OF CORPORATE FINANCE
13th Edition
ISBN: 9781260013900
Author: BREALEY
Publisher: RENT MCG
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Chapter 6, Problem 24PS

Equivalent annual cash flow Deutsche Transport can lease a truck for four years at a cost of €30,000 annually. It can instead buy a truck at a cost of €80,000, with annual maintenance expenses of €10,000. The truck will be sold at the end of four years for €20,000. Ignore taxes.

  1. a. What is the equivalent annual cost of buying and maintaining the truck if the discount rate is 10%?
  2. b. Which is the better option: leasing or buying?
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PRIN.OF CORPORATE FINANCE

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