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 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 Rs 1,000. The discount rate is 8%. The tax rate is 30%. If the firm leases the assets 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 third year. In this case, the annual operating expenses would be Rs 800. The after-tax, firm’s cost of capital in 10%.