Option Lease

Saving
Rental Lease
profit
tax
Net CF
DF@12.59
present value

irr practiceof leasyear 0

Net CF -373,000
DF@18% 1.0000
NPV -373,000

Saving sensitivity of lease [part

Year 0
Saving
DF@12.59% 1
NPV 0

sensitivity of savi =
Option Buy

Saving
License fee
profit
tax
CA
working cap

initial cost
Net CF
DF@12.59%
present value

initial cost dep@25

1050000 0.25
787,500 0.25
590,625 0.25
372,969 1

working capital practice

initial cost 19000
irr practiceof buying
Net CF
DF@15%
NPV

expalnation
sensitivity of saving lease
sensitivity of savingbuyin

accept the project of the machinelea

sensitivity of leace is projrct is 5.41% anfd sensitivity i

 ASPO Co NPV

Year 0 Year 1 Year 2 Year 3

363,660 475,031 628,783
-373,000 -373,000 -373,000 -373,000
-373,000 -9,340 102,031 255,783
-2,802 -30,609
-373,000 -9,340 99,229 225,173
1.0000 0.8882 0.7889 0.7006
-373,000 -8,296 78,278 157,767

year 1 year 2 year 3 year 4

-9,340 99,229 225,173 476,594
0.8475 0.7182 0.6086 0.516
-7,911 71,246 137,131 245,922

Year 1 Year 2 Year 3 Year 4

363,660 475,031 628,783 553,329
0.888 0.789 0.701 0.622
322,995 374,733 440,556 344,337

NPV of project /NPV of saving sensitivity of saving

Year 0 Year 1 Year 2 Year 3
363,660 475,031 628,783
(94,000) (97,525) (101,182)
269,660 377,506 527,601
(80,898) (111,428)
78,750 59,063
570 587 605

(1,050,000)
(1,050,000) 270,230 375,945 475,840
1.0000 0.8882 0.7889 0.7006
(1,050,000) 240,012 296,568 332,119

Capital Allowance
annual dep tax CA timings
262,500 0.3 78,750 2
196,875 0.3 59,063 3
147,656 0.3 44,297 4
372,969 0.3 111,891 5
900,000 270,000

19570 20157.1 20761.813 21384.66739

19000 19570 20157.1 20761.813
570 587.099999999999 604.713 622.85439
 year 0 year 1 year 2 year 3
-1050000 270230 375944.975 475839.74788
1.000 0.870 0.756 0.658
-1050000 235100.1 284268.4120983 312872.35826

if saving increaseby 4%the npv will be 0

4% increase in saving than npv will be 0

t of the machineleasing as np is better

rct is 5.41% anfd sensitivity is buying is 2.41

Year 4 Year 5 IRR of lease part direct 18%
553,329

553,329
-76,735 -165,999
476,594 -165,999
0.6223 0.5527
296,585 -91,750 59,585

year 5 year 6
-165,999
0.4371
-72,541 847

year 5

0.553
1,482,621

4%
Year 4 Year 5
553,329
(104,977)
448,352
(157,609) (134,103)
44,297 111,891 294,000
623 -
IRR of buying part direct
70,000 15%
405,662 (22,212)
0.6223 0.5527
252,444 (12,277) 58,867

Saving
DF@11%
NPV

sensitivity of saving =
sensitivity of saving =

0
year 4 year 5 year 6
405662.3601 -22212.375
0.572 0.497 0.432
231938.771 -11043.47608572 0 3136.2
 IRR mnual
LRNPV 59585
HRNPV 847
High Rat 18%
Lower R 12.59%

IRR = lower ra+ LRNPV/(LRN*

12.59 + 1.01441997 *

IRR = 18.609
 Sensitivity Analysis of buying part

Net CF 363,660 475,031

DF@12.59 1 0.88817835 0.78886077
NPV 322,995 374,733

sensitivity of savin = NPV of project /NPV of sav

IRR

LRNPV 58867
HRNPV 3018.7
High Rate 15%
Lower Rate 12%
HR-LR
5
 628,783 553,329
0.70064906 0.6223013 0.5527145589
440,556 344,337 1,482,621

of project /NPV of savsensitivity of saving 4%

IRR = lower rate + LRNPV/(LRNPV-HRN* HR-LR

12.59 + 1.05405177955282 * 2.41
IRR=15%