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  • Question 1 Lease or Buy

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    Zain Ul Abedin
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    cash flow

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    Book1

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    cash flow

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    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
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    12 views2 pages

    Question 1 Lease or Buy

    Uploaded by

    Zain Ul Abedin
    cash flow

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 2

    Question 1 lease or buy

    capital cost of buldozer is 100000$


    lease cost is 11000$ each year net present value formula is FV/(1+r)^n
    annual maintainance cost is 2000$
    salvage value is 10000$
    MARR is 6.50%

    cash flow table for buying cash flow table for lease
    year credit/exp present value year credit/exp Present value
    0 100000 $100,000.00 0 11000 11000
    1 2000 1877.934272 1 11000 10328.64
    2 2000 1763.318566 2 11000 9698.252
    3 2000 1655.698184 3 11000 9106.34
    4 2000 1554.646182 4 11000 8550.554
    5 2000 1459.761673 5 11000 8028.689
    6 2000 1370.668238 6 11000 7538.675
    7 2000 1287.01243 7 11000 7078.568
    8 2000 1208.462375 8 11000 6646.543
    9 2000 1134.706456 9 11000 6240.886
    10 8000 4261.808284 10 11000 5859.986
    NPV -109050.4001 NPV -90077.1
    As the NPV for lease is less negative therefore it is more suitable
    as compared to buying the bulldozer

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