1. The annual lease rental is Rs 1.5 lac per annum. The after-tax borrowing rate is 7 percent. The lease term is 8 years. Find the monthly lease rental.
2. Can leasing become viable because of better credit rating of the lessor? How? Why; or, why not?
An airline company needs an aircraft. It has two options.
• Buy the aircraft for Rs 50 crore at a post-tax cost of debt of 8.5 percent. The aircraft has a life of 15 years at the end of which it can be salvaged for Rs 14 crore. Annual maintenance expenses are Rs 6 lac.
• Lease it for 15 years by paying Rs 6 crore per year.
Assume straight-line depreciation. Tax rate is 35 percent. WACC is 18.5 percent. Calculate NAL
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