Assessment brief
Scenario
Having recently graduated you are employed as a trainee accountant in the finance department of a large organisation.
The Director of Finance has asked for a report considering asset investment decisions and capital rationing: the company is considering a major capital investment decision, a replacement of its fleet vehicles and the DOF wants to see any advantages of purchasing over leasing capital assets by the organisation in the environment of risk and uncertainty caused by Brexit.
Requirement: Write a report using examples considering the evaluation of the choice between borrowing to purchase and leasing an asset.
Your report should consider the following aspects of investment appraisal.
How might the before and after tax costs of debt affect the debt decision?
How might the decision be considered in an environment where capital availability is limited?
What factors should be considered in making a capital investment in an environment of risk and uncertainty?
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