Fitbit Ltd has leased a machine on the following terms:Date of entering lease 1 July...

Fitbit Ltd has leased a machine on the following terms:

Date of entering lease 1 July 2019

Duration of lease 5 years

Life of asset 6 years

Unguaranteed residual value $40,000

Lease payments inception (at the start) $60,000

Annual payments (5) $65,000

Implied rate 11.0 %

Required: Determine the Fair Value (rounded off) of the leased asset.

Expert Solution

Discounting Rate	11%
Year	Installment	Discounting Factor	NPV
1	65000	0.901	58,565.00
2	65000	0.812	52,780.00
3	65000	0.731	47,515.00
4	65000	0.659	42,835.00
5	65000	0.593	38,545.00

NPV	$ 2,40,233.31
Lease payment at start	60000
Fair Value (A+B)	$ 3,00,233.31

Fair value of asset (rounded off) is $ 3,00,233.

ekkarill92 answered 3 years ago

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