CIMA Exam CIMAPRA19-F03-1 Topic 2 Question 37 Discussion

A company is undertaking a lease-or-buy evaluation, using the post-tax cost of bank borrowing as the discount rate.

Details of the twoalternatives are as follows:

Buy option:

* To be financed by a bank loan

* Tax depreciation allowances areavailable on a reducing-balance basis

* Assets depreciated on a straight-line basis

Lease option:

* Finance lease

* Maintenance to be paid by the lessee

* Tax relief available on interest payments and book depreciation

Which THREE of the followingare relevantcashflows in the lease-or-buy appraisal?