The salvage value of the truck at the end of the period amounts to R50 000 and the company uses the straight line method of depreciation. Note: а. The after tax cost of debt is 10%. b. The tax rate is...

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Extracted text: The salvage value of the truck at the end of the period amounts to R50 000 and the company uses the straight line method of depreciation. Note: а. The after tax cost of debt is 10%. b. The tax rate is 30%. Required 4.1 Calculate the cost of owning and leasing using the discounted cash flow method. 4.2 Advise on the option to adopt, with justification.


Extracted text: QUESTION FOUR One Stop Transport is considering the purchase of a new 4 ton truck for R400 000. Alternatively, the truck can be leased on a five year contract for R110 000 p.a. If the truck is owned, the service and maintenance charges will amount to R16 000 per annum and will be borne by the owner, whereas, the leasing charges are inclusive of maintenance.