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{"ops":[{"attributes":{"bold":true},"insert":"King Corporation Limited (KCL), a producer of electricity,"},{"insert":" is considering to expand its operation by adding "},{"attributes":{"bold":true},"insert":"5"},{"insert":" generators. The cost of these generators would be "},{"attributes":{"bold":true},"insert":"Tk. 100 million"},{"insert":". The expected life of the generators is "},{"attributes":{"bold":true},"insert":"5 years"},{"insert":". The addition of these generators will result in cash inflows of "},{"attributes":{"bold":true},"insert":"Tk. 50 million"},{"insert":" per year for 5 years. Cash outflows would be "},{"attributes":{"bold":true},"insert":"50% of cash"},{"insert":" inflows. "},{"attributes":{"bold":true},"insert":"KCL"},{"insert":" uses straight line method of depreciation and expects no salvage value from the generators at the end their service lives. IDLC, a leading Non-Bank Financial Institution, offered "},{"attributes":{"bold":true},"insert":"KCL"},{"insert":" to lease the generators for 5 years. The lease payments to be made at the beginning of each year would be "},{"attributes":{"bold":true},"insert":"Tk. 24"},{"insert":" "},{"attributes":{"bold":true},"insert":"million"},{"insert":". The annualized risk-free rate of return is "},{"attributes":{"bold":true},"insert":"7%"},{"insert":". Tax rate for both "},{"attributes":{"bold":true},"insert":"KCL"},{"insert":" and IDLC is "},{"attributes":{"bold":true},"insert":"30%"},{"insert":".\n\nc.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Show the incremental cash flows for lease versus buy to "},{"attributes":{"bold":true},"insert":"KCL "},{"insert":"of the generators.\nd.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Calculate the NPV from the incremental cash flows. If you are the analyst, would you recommend "},{"attributes":{"bold":true},"insert":"KCL"},{"insert":" to take a lease on the generators from IDLC or buy them?\n\n"}]}

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