Lease

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

28 January 2011 My compnay is going to buy 150 computers for around Rs. 60,00,000. I have been asked to prepare a report on the feasibility of the option to take the computers on either operating lease or financial lease. The IRR is 10%, Lease period should be 2 - 3 years. friends please advice me on this matter and help me to prepare this report because this is my first assignment in my new office and I want to give a good impression to my CFO.

please helppppp....

Thrissurkkaran Ishtan

Thrissurkkaran Ishtan (Expert)
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29 January 2011 Prepare the cash out flows for both for the period of both leases:
Operating lease - This will be rentals net of tax
Finance lease - This will be interest payment net of tax. Tax benefit on depreciation. Principal payment and residual value net of tax.
Compute NPV by using an appropriate discount % and highest NPV option should be selected.
Hope this helps.