SFM - lease financing plz help - Students

SFM - lease financing plz help

Page no : 2

sasi kumar (FACULTY FOR PCC COSTING AND FINANCIAL MGT) (30 Points)
Replied 20 July 2018

Lease is an alternative to borrow and purchase,it's have similar risk as that of borrow and purchase option ,so it's better to use post tax kd as discounting factor,some times we may an option to finance the asset with debt and equity ,such a case use KO as discounting factor,some times a firm may finance similar asset with debt and equity which it consider as optimal structure may consider KO as opportunity cost,so we can u ko or post kd as discounting factor,it's advisable to post tax kd as discounting factor,since leasing is alternative to borrowing