Using only the relevant data, which of the following is correct?

A project requires an initial outlay of $2 million which can be financed with either a bank loan or finance lease.

The company will be responsible for annual maintenance under either option.

The tax regime is:

• Tax depreciation allowances can be claimed on purchased assets.

• If leased using a finance lease, tax relief can be claimed on the interest element of the lease payments and also on the accounting depreciation charge.

The trainee management accountant has begun evaluating the lease versus buy decision and has produced the following data. He is not confident that all this information is relevant to this decision.

Using only the relevant data, which of the following is correct?
A . The bank loan is $30,000 MORE expensive than the finance lease.
B . The bank loan is $20,000 LESS expensive than the finance lease.
C . The bank loan is $70,000 LESS expensive than the finance lease.
D . The bank loan is $120,000 LESS expensive than the finance lease.

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Answer: C