HP..Probs

HP..Probs - Cost of Asset Rs.30,000 Down Payment 25%...

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Problems on HP: 1. M Ltd is offering equipment finance under HP scheme as follows:- Down Payment 20% Flat Rate 15% Duration 3 years Repayment Monthly in Advance P Ltd is considering a modernization scheme for which it requires to invest in equipment worth Rs.280 lakhs. It has given the following information:- Tax Rate applicable 30% Debt: Equity Ratio 3:1 Cost of Debt 16% Cost of Equity 26.4% Tax relevant Depreciation 25% Salvage value Negligible Interest allocation SOYD method Find the cost of HP to the Hire-Purchaser. 2. F Ltd is evaluating a HP proposal. Its details are as follows:-
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Unformatted text preview: Cost of Asset Rs.30,000 Down Payment 25% Interest 12% p.a. Flat Rate Duration 3 years Payment In Monthly installments in Arrears Tax relevant Depreciation 25% Debt: Equity Ratio 4:1 Pre-tax Cost of Debt 20% Cost of Equity 24% Tax Rate 43% Net Salvage value after 3 years 10% of original cost Interest allocation SOYD method Find:-(a) NPV of HP plan, assuming interest tax. (b) Calculate ERI , using approximate formula....
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This note was uploaded on 01/28/2011 for the course FIN 315 taught by Professor Welker during the Spring '09 term at IUP.

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