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Calculate the cash flows from buying and leasing

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Question - Dream Ltd could purchase a machine for $100,000. As the machine has a timer mode, Dream Ltd can save annual cost of $10,000. The machine has a useful life of 5 years and has zero salvage value after which. Depreciation for the machine would be on a straight-line basis. The company's borrowing cost and corporation tax rate are at 4% and 18% respectively. Alternatively, Dream Ltd could lease the machine from Reus & Co at $20,800 per annum. Calculate the cash flows from buying and leasing and make a recommendation?

Reference no: EM133056663

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