5.4 Revision Exercise 4 Campus Copy is contemplating leasing a high-technology scanner. The scanner costs R800 000 and if purchased it will be depreciated straight-line to zero over four years....

Answer only 5.4

Extracted text: 5.4 Revision Exercise 4 Campus Copy is contemplating leasing a high-technology scanner. The scanner costs R800 000 and if purchased it will be depreciated straight-line to zero over four years. Because of radiation contamination it will be completely value-less in four years. Campus Copy can lease the scanner for R250 000 per year for four years from Secure Scan. Assume lease payments are made at the end of year and Campus Copy is in the 30% tax bracket: What are Campus Copy's expected cash flows for leasing the scanner if the interest rate is 10%? Should Campus Copy lease the scanner? 5.5 Revision Exercise 5 Okay Oil is deciding whether to lease or buy drilling equipment for oil exploration. The equipment costs R6 million and will be depreciated using the straight -line method over five years to a zero value. Okay Oil's tax rate is 28% and is able to borrow funds at 9% interest. Digger Drills has offered to lease the equipment to Okay Oil for R1 400 000 per year.