XYZ Ltd Intends to Lease to Another Company for a Duration

question 14

Multiple Choice

XYZ Ltd intends to lease to another company for a duration of five years equipment which costs $500 000 and can be depreciated straight-line over three years for tax purposes.Assume the cost of capital is 10% p.a. ,the residual value is 20 per cent of cost and the tax rate is 30 per cent.Calculate the required present value of the lease payments.

• A)$375 657
• B)$342 812
• C)$323 065
• D)$332 193

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