DLP Pvt Sample Clauses

DLP Pvt. Ltd . is considering the possibility of purchasing a multipurpose machine which cost Rs. 10.00 Lakhs. The machine has an expected life of 5 years. The machine generates Rs. PV 12% PV 16% 1.000 1.000 0.893 0.862 0.797 0.743 0.712 0.641 0.636 0.552 0.567 0.476 272 Fiamamcia¬ MamagEmEmY & imYErmaYioma¬ FimamcE I Purchase : (Rs. Lacs) Initial outlay Op. Profit (10) 6.00 2.50 6.00 1.88 6.00 1.40 6.00 1.06 6.00 0.79 Less : Depreciation Profit before tax Less:Tax @ 50% 3.50 1.75 4.12 2.06 4.60 2.30 4.94 2.47 5.21 2.60 Profit after tax Add:Depreciation Salvage value of machine 1.75 2.50 ...... 2.06 1.88 ...... 2.30 1.40 ....... 2.47 1.06 ..... 2.61 0.79 1.00 Net cash Inflow 4.25 3.94 3.70 3.53 4.40 Present value factor @ 12% 1.00 .893 .797 .712 .636 .567 Present values (10) 3.80 3.14 2.63 2.25 2.49 NPV of purchase option is Rs. 4,31,000 II Lease : (Rs. lacs) Particulars 1 2 3 4 5 Operating profit Less:lease Rent Profit before tax 6.003.36 6.003.36 6.003.36 6.003.36 6.003.36 Tax @ 50% 2.641.32 2.641.32 2.641.32 2.641.32 2.641.32 Profit after tax 1.32 1.32 1.32 1.32 1.32 Discount factor @16% 0.862 0.743 0.641 0.552 0.476 Present values 1.14 0.98 0.85 0.73 0.63 The net present valu of lease option is Rs. 4,33,000. Analysis : From the analysis of the above we can observe that NPV of lease option is more than that of purchase option. Hence, lease of machine is recommended. Illustration 2 : Agrani Ltd. is in the business of manufacturing bearings. Some more product lines are being planned to be added to the existing system. The machinery required may be bought or may be taken on lease. The cost of machine is Rs. 40,00,000 having a useful life of 5 years with the salvage of Rs. 8 lakhs. The full purchase value of machine can be financed by 20% loan repayable in five equal installments falling due at the end of each year. Alternatively, the machine can be produced on a 5 year lease, year end lease rentals being Rs. 12,00,000 per Fiamamcia¬ MamagEmEmY & imYErmaYioma¬ FimamcE
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