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Question: The bus costs $1.8 million, with a CCA rate of 25 percent.

09 Sep 2024,9:23 PM

 

Nash Business School is considering whether to lease or buy a shuttle bus for students travelling between its two campuses. The bus costs $1.8 million, with a CCA rate of 25 percent. The lease payments are $400,000 per year for the next five years, with payments made at the beginning of each year. There is no maintenance cost, and the expected market value of the bus after five years is zero. Assuming the lease qualifies as an operating lease and the cost of borrowing is 5 percent should Nash Business School lease the bus or buys it? Universities do not pay tax.

 

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