Casso limited has an option to purchase new car for the use from a bank on loan for Rs. 100,000 with 16% interest payable annually and the principal is repayable in full at the end of four years. Alternatively, the car could be leased for 4 years, with the following terms:
- • Down payment Rs. 22,000
- • Four annual payments Rs. 25,000
- • Fair value of the asset Rs. 100,000
- • Implicit rate of interest 10%
- • Rental is to be paid at the beginning of the year.
Required:
Find which option is more suitable for the company.