Determine the purchasing in leaminger plc, Financial Management

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b) Each $1 of outlay prior to 31 December 2003 would mean a loss in NPV on the alternative project of $0·20. There is so an opportunity cost of using funds in 2002.

Purchasing

561_Determine the Purchasing in leaminger plc.png

Finance lease

Net Present Cost = $(345,818)

There is no cash flow prior to 31 December 2003 in this case and thus no opportunity cost.

Operating lease

1677_Determine the Purchasing in leaminger plc 1.png

Therefore the finance lease is now the lowest cost option.

All the above presume that the alternative project cannot be delayed.


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