On January 1, 2017, Wood Corporation leases a piece of equipment
from Prior Corporation and properly accounts for the equipment as a
finance lease. Under the agreement, Wood will make 7 annual
payments of $750,000 each January 1st. At the end of 7 years, Wood
has the option of buying the equipment for $200,000, when the
estimated fair value will be $400,000. If Wood's incremental
borrowing rate is 7%, what is the present value of the minimum
lease payments?
$4,574,004.64...