Casso limited has an option topurchase new car for the use

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Reference no: EM13613869

PROBLEM -DECISION MAKING ABOUT LOAN& LEASE

Casso limited has an option topurchase new car for the use from a bank on loan for Rs. 100,000with 16% interest payable annually and the principal is repayablein full at the end of 4 years. Alternatively, the car could beleased for 4 years, with the following terms:

• Downpayment Rs. 22,000
• Four annualpayments Rs. 25,000
• Fair valueof the asset Rs. 100,000
• Implicitrate of interest 10%
• Rental isto be paid at the beginning of the year.

Required:

Find which option is moresuitable for the company.

Reference no: EM13613869

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