2. Financial Lease
• Long-term, non-cancelable lease contracts are
known as financial lease.
• Examples are
plant, machinery, land, building, ships and
aircrafts.
3. Discounting Rates
• Cost of borrowing(after tax) kd: 9.5%
• Cost of capital(after-tax) k:12.0%
• Depreciation Tax Shield & After Tax Lease Rentals are
discounted at 9.5%.
• After-tax Operating Expenses & Salvage Value are Discounted
at 12%