Shine Ltd is considering purchasing or leasing new equipment.If it purchases the equipment it will cost $500 000 and if it leases the equipment it will be required to pay six rentals of $115 000 each.The equipment can be depreciated over three years on a straight-line basis for tax purposes.The residual value is expected to be zero and the tax rate is 30 per cent.Assume that rental payments are paid at the beginning of each period.Assume the cost of capital after tax is 10 per cent.Calculate the NPV (approx. )of the lease relative to an equivalent loan.

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The Answer of Shine Ltd is considering purchasing or leasing new equipment.If it purchases the equipment it will cost $500 000 and if it leases the equipment it will be required to pay six rentals of $115 000 each.The equipment can be depreciated over three years on a straight-line basis for tax purposes.The residual value is expected to be zero and the tax rate is 30 per cent.Assume that rental payments are paid at the beginning of each period.Assume the cost of capital after tax is 10 per cent.Calculate the NPV (approx. )of the lease relative to an equivalent loan.

Shine Ltd Is Considering Purchasing or Leasing New Equipment