Suitable option to buy a car

Reference no: EM13256619

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

• Down payment Rs. 22,000
• Four annual payments Rs. 25,000
• Fair value of the asset Rs. 100,000
• Implicit rate of interest 10%
• Rental is to be paid at the beginning of the year.

Required:

Find which option is more suitable for the company.

Reference no: EM13256619

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