LEASING AND HIRE PURCHASE
Net Present Value of Hire Purchase Plan [NPV (HPP)] The NPV (HPP) consists of: 1. Present value of hire purchase installments 2. Plus: Documentation and service fee 3. Plus: Present value of tax shield on initial direct cost 4. Minus: Loan amount 5. Minus: Initial...
LEASING AND HIRE PURCHASE
From the Viewpoint of Finance Company (Hire Vendor) Hire purchase and leasing represents two alternative investment decisions of a finance company financial intermediary hire vendor. The decision criterion, therefore, is based on a comparison of the net present values...
LEASING AND HIRE PURCHASE
Decision Criterion The decision criterion from the point of view of a hirer is the cost of hire purchase vis-a-vis the cost of leasing. If the cost of hire purchase is less than the cost of leasing, the hirer (purchaser) should prefer the hire purchase alternative and...
LEASING AND HIRE PURCHASE
Financial Evaluation The framework of financial evaluation of a hire purchase deal vis-a-vis a finance lease, discussed below, covers both the hire as well the finance company's viewpoint. From the Point of View of the Hirer (Hire Purchaser) The tax treatment given to...
LEASING AND HIRE PURCHASE
In the Books of Hire Vendor (Finance Company) At the inception of the transactions, the finance company should record the hire purchase installments receivables as a current asset (i.e., stock on hire) arid the (unearned) finance income component of these installments...
LEASING AND HIRE PURCHASE
In the Books of Hirer The cash purchase price of the asset is capitalized and the capital of the hire purchase installment, that is, the cash purchase price less down payment, if any, recorded as a liability. Depreciation is based on the cash purchase price of the...
