Calculating Lessor Payment-Guaranteed Residual ValueQuest Inc. is negotiating an agreement to lease equipment to a lessee for 8 years. The equipment has a useful life of 10 years. The fair value of the equipment is $28,000 and the lessor expects a rateof return of 8% on the lease contract. The lessee guarantees a residual value of $7,000 at the end of the 8-year lease term. If the first annual payment is required at the end of the first year followingthe commencement of the lease, what fixed lease payment should Quest Inc. charge in order to earn its expected rate of return on the contract?• Note: Enter the answer in dollars and cents, rounded to the nearest penny.• Note: Do not use a negative sign with your answer.Lease payment $ 4,379.94 *

Lease is kind of arrangement where equipment can be used without much initial investment and only…

Answered: Calculating Lessor Payment-Guaranteed…

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

See similar textbooks

Similar questions

A active lease involves obligations that are not evenly distributed over the lease period. That the very first year's rent is $14,000, with a total payment of $120,000 throughout the four lease period. Interest expenditure for the first year is $6,000, relating to the current value of the entire lease payments and the implicit interest rate. For the first year, the right-to-use asset should be amortised as follows: Multiple-choice questions $0 $8,000 $20,000 $24,000
2.
A lease agreement that qualifies as a finance lease calls for annual lease payments of $40,000 over a six-year lease term (also the asset's useful life), with the first payment on January 1, the beginning of the lease. The interest rate is 7%. Required: If the lessee's fiscal year is the calendar year, what would be the amounts related to the lease that the lessee would report in its income statement for the first year ended December 31 (ignore taxes)?
On January 1, Garcia Supply leased a truck for a four-year period, at which time possession of the truck will revert back to the lessor. Annual lease payments are $10,000 due on December 31 of each year, calculated by the lessor using a 5% discount rate. Negotiations led to Garcia guaranteeing a $36,000 residual value at the end of the lease term. Garcia estimates that the residual value after four years will be $35,000. What is the amount to be added to the right-of-use asset and lease liability under the residual value guarantee? Note: Use tables, Excel, or a financial calculator. Enter your answer in whole dollars. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)
Vaibh
One of the departments at Yolo Industries has entered into a 9 year lease for a piece of equipment. The annual payment under the lease will be $3,600, with payments being made at the beginning of each year. If the discount rate is 10%, the present value of the lease payments is closest to (Ignore income taxes.): Click here to view Exhibit 14B-1 and Exhibit 148-2, to determine the appropriate discount factor(s) using the tables provided. (Round your intermediate calculations to 3 decimal places.) Multiple Choice $22,806 $10,07Y $22,105 $32,400
Classifying Leases The following separate scenarios relate to a 5-year lease, pertaining to equipment with a fair value of $50,000. Assume in all scenarios that payments are made at the beginning of the period. 1. Lease payments include a fixed payment of $10,000 per year. 2. Lease payments include a fixed payment of $10,000 per year, plus $500 for insurance and $600 for a maintenance contract. 3. Lease payments will be $10,000 in the first year and will increase by 3% (calculated on the previous year's payment) for each of the following 4 years. 4. Lease payments will be $10,000 in the first year and will increase each of the following years by the increase in the CPI from the preceding year. The current CPI is 120 and is expected to increase to 122 at the end of the next year. 5. Lease payments will be $10,000 in the first year and will increase each of the following years by (a) the increase in the CPI from the preceding year, or (b) 3%, whichever is greater. The current CPI is 120…
right answer please
(Lessor Computations and Entries, Sales-Type Lease with Unguaranteed Residual Value) George Company manufactures a check-in kiosk with an estimated economic life of 12 years and leases it to National Airlines for a period of 10 years. The normal selling price of the equipment is $278,072, and its unguaranteed residual value at the end of the lease term is estimated to be $20,000. National will pay annual payments of $40,000 at the beginning of each year and all maintenance, insurance, and taxes. George incurred costs of $180,000 in manufacturing the equipment and $4,000 in negotiating and closing the lease. George has determined that the collectibility of the lease payments is reasonably predictable,that no additional costs will be incurred, and that the implicit interest rate is 10%.Instructions(a) Discuss the nature of this lease in relation to the lessor and compute the amount of each of the following items.(1) Lease receivable.(2) Sales price.(3) Cost of sales.(b) Prepare a 10-year…
A Limited leased a fleet of trucks for a four year period, with a minimum payment of $30,000 per annum. The interest rate available to A Limited is 5% per annum. The fleet of trucks has a residual value of $45,000, the price at which A Ltd can purchase the fleet at the end of the lease. What is the present value of the lease of the fleet of trucks? Select one or more: O a. $243,401 O b. $150,000 O c. $106,380 O d. $143,402
North Blue Company leased a new copier from Kixko Company on June 1, 2019, under a lease with the following information: Lease term 10 years Annual rental payable at the beginning of each lease year $45,000 Useful Life of machine 10 years Implicit interest rate 12% Present value factor for an annuity of 1 in advance for 10 periods at 12% 6.3282 Present Value factor for 1 for 10 periods at 12% 0.32197 North Blue has the option to purchase a machine on June 1, 2023, by paying $75,000, which approximates the fair value of the machine on the option exercise date. On May 1, 2019, North Blue should record a right-of-use asset in the amount of a.$284,769. b.$292,991. c.$450,000. d.$276,548.
Refer to the following lease amortization schedule. The five payments are made annually starting with the beginning of the lease. A $1,500 purchase option is reasonably certain to be exercised at the end of the five-year lease. The asset has an expected economic life of eight years. Lease Cash Effective Decrease in Outstanding Payment Payment Interest Balance Balance 40,860 31,960 24,978 17,577 9,731 ?? 0 1 2 3 4 5 6 8,900 8,900 8,900 8,900 8,900 1,500 Multiple Choice $46,000 ?? 1,918 1,499 1,055 What is the total interest paid over the term of the lease? $2.760 ?? 85 ?? 6,982 7,401 7,845 ?? 1,415

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS