Assignment

Q2 A company is looking forward towards the buying of new industrial washer to increase their
dying capacity. The company has two options either to lease or purchase. Consider the
following data and calculate NPV and NAL and write a detailed comment about which option
is better.

Purchase price 40,000 dollars

Useful life 6 years
Depreciation method Straight line
Salvage value 8000
Annual saving if purchased `before taxes 4500
Rate of interest on loan before tax 10 percent
Tax rate 40 percent
Annual rents if leased 4500
Annual operating expense if lease – interest 1450
expense
Cost of capial 12 percent