A company signs a lease acquiring the right to use property for five years. Lease payments of $2 end of this year and the next four years. The discount, or interest, rate is 8 percent per year. (Use facto calculation) Required 1: What is the present value of the lease payments? $ Required 2: In the first payment, what is the amount of interest cancelled? $[ Required 3: In the second payment, what is the amount of lease paid net of interest? $ Required A: In the last payment what is the amount of interest cancelled? $1
A company signs a lease acquiring the right to use property for five years. Lease payments of $2 end of this year and the next four years. The discount, or interest, rate is 8 percent per year. (Use facto calculation) Required 1: What is the present value of the lease payments? $ Required 2: In the first payment, what is the amount of interest cancelled? $[ Required 3: In the second payment, what is the amount of lease paid net of interest? $ Required A: In the last payment what is the amount of interest cancelled? $1
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:A company signs a lease acquiring the right to use property for five years. Lease payments of $23417.74 are to be made annually at the
end of this year and the next four years. The discount, or interest, rate is 8 percent per year. (Use factor table in Appendix B for
calculation)
Required 1: What is the present value of the lease payments? $
Required 2: In the first payment, what is the amount of interest cancelled? $
Required 3: In the second payment, what is the amount of lease paid net of interest? $
Required 4: In the last payment, what is the amount of interest cancelled? $
Required 5: Assume the lease contract has the option to buy the property for the present value of the remaining payments plus
$50,000. If the company decides to buy the property at the end of the third year immediately before the third payment, how much it
must pay in dollars at the end of period 3? $
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