This document discusses financial leasing and discounting rates for hire purchase agreements. It notes that long-term, non-cancelable leases are known as financial leases, with examples being plant, machinery, land, buildings, ships and aircraft. The cost of borrowing after tax is 9.5% while the cost of capital after tax is 12%. Depreciation tax shields and after-tax lease rentals are discounted at 9.5% while after-tax operating expenses and salvage value are discounted at 12%.

1. Vishal –Engineering Enterprises
Case on Hire Purchase & Leasing

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%

5. 7

6. INTEREST CALCULATION

7. Hire Purchase of Vishal Engineering

8. Hire Purchase of Vishal Engineering