National Motors Company advertised three alternatives for a 17-month lease on a new Tahoe: (1) zero dollars down anda lease payment of $2,100 per month for 17 months, (2) $6,800 down and $1,850 per month for 17 months, or (3)$42,500 down and no payments for 17 months. (Table B.1, Table B.2, Table B.3, and Table B.4)Note: Use appropriate factor(s) from the tables provided.Calculate the total present value of lease payments under the three alternatives (assume the annual interest rate is 12%compounded monthly).Option 1Down PaymentMonthly PaymentsTotal Present ValueOption 2Down PaymentMonthly PaymentsTotal Present ValueOption 3Down PaymentTotal Present Valuen =i =Table Value1.00001.0000AmountPresent Value1.0000$Table Value Amount Present Value00Table Value Amount Present Value

The total monthly payment is the sum of present value of all monthly payments and down paymentTotal…

Answered: National Motors Company advertised…

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

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
Domebo Corporation has entered into a 8 year lease for a piece of equipment. The annual payment under the lease will be $3,200, with payments being made at the beginning of each year. If the discount rate is 14%, the present value of the lease payments is closest to (Ignore income taxes.): Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided. (Round your intermediate calculations to 3 decimal places.)
Suddeth Corporation has entered into a 6 year lease for a building it will use as a warehouse. The annual payment under the lease will be $2,468. The first payment will be at the end of the current year and all subsequent payments will be made at year-ends. If the discount rate is 5%, the present value of the lease payments is closest to (Ignore income taxes.): Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using the tables provided. Multiple Choice O O $14,808 $11,050 $14,103 $12,528
An owner of the Atrium Tower Office Building is currently negotiating a 5-year lease with ACME Corp. for 20,000 rentable square feet of office space. ACME would like a $23 psf base rent with $1 annual step ups. But ACME also requires Atrium to buyout (upfront, i.e., today) the one year at a total cost of $15 psf. The data are summarized in the same remaining on its existing lease- -- Excel file as before. From Atrium's perspective, what is the NPV of ACME's proposal if the relevant discount rate is 10%? $79.05 $75.57 $69.86 $71.45
The following separate scenarios relate to a 5-year lease, pertaining to equipment with a fair value of $25,000. Assume in all scenarios that payments are made at the beginning of the period. 1. Lease payments include a fixed payment of $5,000 per year. 2. Lease payments include a fixed payment of $5,000 per year, plus $250 for insurance and $300 for a maintenance contract. 3. Lease payments will be $5,000 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 $5,000 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 $5,000 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 and is expected to…
Zhang Company leased equipment from Mann Industries. The lease agreement qualifies as a finance lease and requires annual lease payments of $52,538 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 5%. The asset being leased cost Mann $230,000 to produce. Note: Use tables, Excel, or a financial calculator. (FV of $1. PV of $1. FVA of $1. PVA of $1. EVAD of $1 and PVAD of $1) Required: 1. Determine the price at which the lessor is "selling" the asset (present-value of the lease payments). 2. What would be the amounts related to the lease that the lessor would report in its income statement for the year ended December 31 (ignore taxes)? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Determine the price at which the lessor is "selling" the asset (present value of the lease payments). Note: Round your intermediate and final answers to the nearest whole…
Belardo Manufacturing is considering a lease to acquire new equipment. The useful life of the asset is 10 years. Belardo can lease the equipment from Weber City Bank for $5,000 per year over an 9-year period. The lease does not contain a purchase option. There is no transfer of ownership clause in the contract. Should Belardo account for this lease as an operating or a finance lease? Future Value of $1 table Future Value of an Ordinary Annuity table Future Value of an Annuity Due table Present Value of $1 table Present Value of an Ordinary Annuity table Present Value of an Annuity Due table Begin by identifying any of the Group I criteria that Belardo meets. (Select all that apply. If there is insufficient information to determine if a specific criteria is met, do not check the box for that criteria.) 1. The lease transfers ownership to the lessee at the end of the lease term. 2. The lessee is given an option to purchase the asset that the lessee is reasonably certain to exercise. 3.…
A construction company agreed to lease payments of S427.14 on construction equipment to be made at the end of every month for 8.75 years. Financing is at 9% compounded monthly. (a) What is the value of the original lease contract? (b) If, due to delays, the first 9 payments were deferred, how much money would be needed after 10 payments to bring the lease payments up to date? (c) How much money would be required to pay off the lease after 10 payments? (d) If the lease were paid off after 10 payments, what would the total interest be? (e) How much of the total interest would be due to deferring the first 9 payments? (a) The value of the original lease contract is S (Round the final answer to the nearest cent as needed. Round all intermediate values to six decimal places as needed.) (b) The company would have to pay $ (Round the final answer to the nearest cent as needed. Round all intermediate values to six decimal places as needed.) (c) The company would need $. (Round the final answer…
Zhang Company leased equipment from Mann Industries. The lease agreement qualifies as a finance lease and requires annual lease payments of $49,677 over a five-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 4%. The asset being leased cost Mann $180,000 to produce. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Required: 1. Determine the price at which the lessor is "selling" the asset (present value of the lease payments). 2. What would be the amounts related to the lease that the lessor would report in its income statement for the year ended December 31 (ignore taxes)?. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Determine the price at which the lessor is "selling" the asset (present value of the lease payments). Note: Round your intermediate and final answers to the nearest whole…
The toyota motor company is advertising a 24 month lease of 2014 camry for $189 payable at the beginning of each month. The lease requires $2,399 down payment plus first month payment. No security deposit is required. Lessee pays maintenance, excess wear and tear, and $0.18 per mile over 12,000 miles per year. Lease-end purchase option is $17,784 and lease payments total $4,536. A disposition fee of $350 is due at lease-end. Assuming an interest rate of 6% compounded monthly, what is the total cost of leasing if you put 40,000 miles at the end of lease?
Zhang Company leased equipment from Mann Industries. The lease agreement qualifies as a finance lease and requires annual lease payments of $53,750 over a five-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 6%. The asset being leased cost Mann $190,000 to produce. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Required: 1. Determine the price at which the lessor is "selling" the asset (present value of the lease payments). 2. What would be the amounts related to the lease that the lessor would report in its income statement for the year ended December 31 (ignore taxes)? Required 1 Required 2 Determine the price at which the lessor is "selling" the asset (present value of the lease payments). Note: Round your intermediate and final answers to the nearest whole dollar. PV factors based on Table or Calculator function: Lease…
The Harris Company is the lessee on a four-year lease with the following payments at the end of each year: Year 1: $ 11,500 Year 2: $ 16,500 Year 3: $ 21,500 Year 4: $ 26,500 An appropriate discount rate is 7 percentage, yielding a present value of $62,927. a-5. If the lease is an operating lease, what will be the amortization expense shown on the income statement at the end of year 1? (Leave no cells blank – be certain to enter “0” wherever required.) b-1. If the lease is a finance lease, what will be the initial value of the right-of-use asset? b-2. If the lease is a finance lease, what will be the initial value of the lease liability? b-3. If the lease is a finance lease, what will be the lease expense shown on the income statement at the end of year 1? (Leave no cells blank – be certain to enter “0” wherever required.) b-4. If the lease is a finance lease, what will be the interest expense shown on the income statement at the end of year 1?…

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