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?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Transcribed Image Text: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?
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