A firm needs an asset that costs Rs 6,000. The salvage value at the end of the third year is expected to be Rs 600. The annual revenue is expected to be Rs 4,000 and the annual operating cost to be Rs...

A firm needs an asset that costs Rs 6,000. The salvage value at the end of the third year is expected to be Rs 600. The annual revenue is expected to be Rs 4,000 and the annual operating cost to be Rs 1,000. The discount rate is 10%. The tax rate is 30%. If the firm leases the asset instead of buying it, it has to pay an annual rental of Rs 2,500 on the condition that it would be payable at the end of the first, second and the third year. In this case, the annual operating expenses should be Rs 800 and the discount rate would be 12%.