Own vs.

Lease
Details for Own
Cost of the Machine 50000
Down payment 25%
Loan for the balance at 10% interest
Equated Annual Instament 11830
Asset Life 8 years
Depreciation SLM
Tax rate 30%
Salvage Value 2500
Cash flows under Own Decision 0 1 2
Down payment 12500
Instalments 11830 11830
Interest expenses 3750 2941.984
Depreciation 5937.5 5937.5
Tax benefit on depreciation and Interest expenses 2906.25 2663.845
Salvage value
Net cash flows 12500 8924 9166
Present Value $37,908.60
Details for Finance Lease
Cost of the Machine 50000
Down payment 8500
Lease period 8 years including down payment
Equated annual rent 8500 payable at the beginning of each year afte
Cash flows under Lease Decision 0 1 2
Down payment/Lease rental 8500 8500 8500
Tax benefit on rental 2550 2550
Net cash flows 8500 5950 5950
Present Value $39,082.15
 Split of equated Instalment
Beginning InstalmentInterest Principal End
1 37500 11830 3750 8080 29420
2 29420 11830 2941.984 8888 20532
3 20532 11830 2053.167 9777 10755
4 10755 11830 1075.469 10755 0

3 4 5 6 7 8

11830 11830
2053.167 1075.469
5937.5 5937.5 5937.5 5937.5 5937.5 5937.5
2397.2 2103.891 1781.25 1781.25 1781.25 1781.25
2500
9433 9726 -1781 -1781 -1781 -4281

down payment
t the beginning of each year after the first year
3 4 5 6 7 8
8500 8500 8500 8500 8500
2550 2550 2550 2550 2550 2550
5950 5950 5950 5950 5950 -2550