IBFS.D.3.C - to the machinery is 33.3(WDV The asset is...

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Set-C Name:……………………. Roll No…………………. .… IBFS-D: Internal test-3(Date: 30.8.2008) Total Marks: 15 Time: 45 Minutes Note: Attempt any 2 questions. Each questions carries 7.5 marks. 1. PQR Ltd (PQRL) is a textile manufacturing company with a capacity of 60,000 spindles. It has approached Matodor Leasing Company Ltd (MLCL) for arranging lease of machinery worth Rs. 225 lakhs. MLCL has proposed the following terms: Primary lease period: 5 years Leases rental : Rs. 26 per thousand per month payable quarterly in advance The cost of the equipment includes 4% central sales tax on outright purchase but the rate of central sales tax for MLCL is 10%. Further, lease rentals also attract a local sales tax of 4.5%. PQRL’s pre- tax cost of debt is 15%. The marginal tax rate is 42%. The tax relevant depreciation rate applicable
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Unformatted text preview: to the machinery is 33.3% (WDV). The asset is expected to fetch residual value of Rs. 25 lakh at the end of 5 years. Calculate net advantage of leasing using Equivalent Loan Model & give ur recommendations. (7.5 marks) 2. Phoenix Leasing Ltd. (PLL) has provided the following data: • Investment cost: Rs.50 lakhs • Pre-tax required rate of return: 22% p.a. • Primary Lease Period: 5 years • Residual value after the primary period. Nil Determine the annual lease rentals chargeable under the following rental structures:-a. Equated b. Stepped up assuming an increase of 12% p.a. c. Ballooned assuming an annual of Rs.5 lakhs for years 1to 4. d. Deferred assuming a deferment period of 1 year. (1.5+3+1.5+1.5= 7.5 marks) 1...
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