Mathematics · Financial Management
A logistical enterprise wishes to modernize its fleet through a series of lease agreements. The company has a choice between a 5-year finance lease and an outright purchase financed by a 5-year term loan at 10.5% annual interest. The trucks have a total cost of ₹5,00,00,000 and the lease requires annual payments of ₹1,35,00,000. If the corporate tax rate is 25% and the discount rate equals the after-tax cost of debt, which method provides a lower cost and what is its approximate present value?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Purchasing is better with a present value of ₹3,92,45,000
- 2Leasing is better with a present value of ₹3,72,11,000✓
- 3Purchasing is better with a present value of ₹3,65,22,000
- 4Leasing is better with a present value of ₹3,85,45,000
Correct answer
Leasing is better with a present value of ₹3,72,11,000
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