Ajman LLC is planning to purchase a machinery for OR.85,000. The useful life of the machinery is 6 years. The machinery will be sold after 5 years for OR.15,000. The annual cost of maintenance and repairs is expected to be OR.8,000. The company wants to insure the machinery with an annual premium of OR. 3,000. The cost of capital for the company is 12%. Alternatively, company has an option to lease the same machinery with a lease rental of OR.25,000 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 calculate the total annual cost, if Ajman LLC company lease the asset. a. RO.23,000 b. RO.43,000 c. None of the options d. RO.33,000

Ajman LLC is planning to purchase a machinery for OR.85,000. The useful life of the machinery is 6 years. The machinery will be sold after 5 years for OR.15,000. The annual cost of maintenance and repairs is expected to be OR.8,000. The company wants to insure the machinery with an annual premium of OR. 3,000. The cost of capital for the company is 12%. Alternatively, company has an option to lease the same machinery with a lease rental of OR.25,000 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 calculate the total annual cost, if Ajman LLC company lease the asset. a. RO.23,000 b. RO.43,000 c. None of the options d. RO.33,000

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 9P

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