Net Present Value of Hire Purchase Plan [NPV (HPP)] Homework Help

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 cost
6. Minus: Present value of interest tax on the finance income
7. Minus: Present value of income tax on finance income (interest) netted for interest tax
8. Minus: Present value of income tax on documentation and service fee

Net Present Value of Lease Plan [NPV (LP)]

The NPV (LP) consists of the following elements:
1. Present value of lease rentals
2. Add: Lease management fee
3. Add: Present value of tax shield on initial direct costs and depreciation
4. Add: Present value of net salvage value
5. Less: Initial investment
6. Less: Initial direct costs
7. Less: Present value of tax liability on lease rentals and lease management fee

Posted by: andy

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