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  • Gamma Ltd. Is Considering A Lease of An Equipment Costing Rs800 Lakhs. Life of The

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    Gamma Ltd is considering either leasing or buying equipment worth Rs. 800 lakhs that has an 8 year life. The annual lease rent would be Rs. 160 lakhs. The company must cover insurance, maintenance, and operating expenses under both options. The document asks to (a) calculate the incremental cash flows, (b) use the equivalent annual cost method to evaluate the lease proposal, and (c) calculate the net annual lease payment.

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    Gamma Ltd is considering either leasing or buying equipment worth Rs. 800 lakhs that has an 8 year life. The annual lease rent would be Rs. 160 lakhs. The company must cover insurance, maintenance, and operating expenses under both options. The document asks to (a) calculate the incremental cash flows, (b) use the equivalent annual cost method to evaluate the lease proposal, and (c) calculate the net annual lease payment.

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    38 views1 page

    Gamma Ltd. Is Considering A Lease of An Equipment Costing Rs800 Lakhs. Life of The

    Uploaded by

    Love Sandy
    Gamma Ltd is considering either leasing or buying equipment worth Rs. 800 lakhs that has an 8 year life. The annual lease rent would be Rs. 160 lakhs. The company must cover insurance, maintenance, and operating expenses under both options. The document asks to (a) calculate the incremental cash flows, (b) use the equivalent annual cost method to evaluate the lease proposal, and (c) calculate the net annual lease payment.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
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    • Gamma Ltd. is considering a lease of an equipment costing Rs800 lakhs.

    Life of the
    machine is expected to be 8 yrs. Instead of buying, the same equipment can be leased for
    8 years with an annual lease rent (payable at the end of the year) of Rs160 lakhs from
    Mfrs. The company will have to take care of insurance, maintenance and operating
    expenses in both the alternatives-leasing or buying. Assuming the Straight Line Deprn
    method; Tax rate of 35% and a borrowing rate of 14%.

    (a) Calculate incremental cash flow


    (b) Use ELM to evaluate the lease proposal
    (c) Calculate NAL

    Mousumi Bhattacharya_CF_2022-2024_07.02.2023

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