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Describe the main features of big-ticket leases

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Reference no: EM132533025

A Plc. needs a new computer that costs £750. It can either buy it or lease it from the computer leasing company. The computer will be depreciated using a five-year MACRS schedule (see details in the formula sheet) and will be worth nothing at the end of six years. A Plc. can lease the computer with the payments of £150 (pre-paid) for six years. The corporate tax rate is 23 percent and the cost of capital is 8.5 percent.

Question 1) Compare the NPV of Buy and Lease and make a decision whether the firm should buy or lease the machine.

Question 2) Outline the major reasons for leasing.

Question 3) What is the main feature of leveraged leasing?

Question 4) What is sale and lease-back and briefly explain the advantages of sale and lease-back.

Question 5) Describe the main features of big-ticket leases.

Reference no: EM132533025

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