Casso limited has an option to purchase new car for the use froma bank on loan for Rs. 100,000 with 16% interest payable annually and the principal is repayable in full at the end of 4 years.Alternatively, the car could be leased for 4 years, with thefollowing 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.