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?

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Refer to the given data:

Asset cost = Rs 220 lac

Lease payments for the first 7 years = Rs 23 lac

Lease payments for the next 8 years = Rs 28 lac

Salvage value = 0

Lease payments are made at the end of the year

Cost of debt for the lessee is 9 percent after tax

Depreciation is charged @ 25 percent.

Tax rate is 35 percent.

Find the NAL. Would you lease?

Rework with a tax rates of 35 percent and 0 percent for the lessor and the lessee respectively. What is the break-even lease rental?

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