Question

In: Finance

Consider a 4​-year lease for a $ 250000 bottling​ machine, with a residual market value of...

Consider a 4​-year lease for a $ 250000 bottling​ machine, with a residual market value of $ 87500 at the end of 4 years. If the​ risk-free interest rate is 5.4 % APR with monthly​ compounding, compute the monthly lease payment in a perfect market for the following​ leases:

a. A fair market value lease.

b. A $ 1.00 out lease.

c. A fixed price lease with an $ 58000 final price

Solutions

Expert Solution

a. Monthly lease payment = $4146.87

b.Monthly lease payment = $5776.74

c.Monthly lease payment = $4696.36

Please find the solution below:

Please let me know in case you have any queries and I will be happy to assist you.

jeff jeffy answered 1 year ago
Next > < Previous

Related Solutions

Recording Finance Lease Journal Entries— Guaranteed Residual Value Smith, the lessee, signs an 8-year lease agreement...
Recording Finance Lease Journal Entries— Guaranteed Residual Value Smith, the lessee, signs an 8-year lease agreement of a floor of a building on December 31, 2020, that requires annual payments of $70,000, beginning immediately. The residual value is guaranteed to the lessor of $50,000 at the end of the lease term. Smith estimates that the residual will have a value of $30,000 at the end of the lease term. Smith is aware of the lessor’s implicit rate of interest of...
Hughey Co. as lessee records a three-year lease of machinery with guaranteed residual value on January...
Hughey Co. as lessee records a three-year lease of machinery with guaranteed residual value on January 1, 2011. The annual lease payments of $350,000 are made at the end of each year. The total present value of the annual lease payments at 10% is $870,398. The guaranteed residual value at the end of the lease term is $100,000 and Hughey Co. expects the leased machinery to have an actual residual value of 80,000. The present value factor for a single...
A three-year-old machine has a cost of $19,100, an estimated residual value of $2,600, and an...
A three-year-old machine has a cost of $19,100, an estimated residual value of $2,600, and an estimated useful life of 33,000 machine hours. The company uses units-of-production depreciation and ran the machine 4,400 hours in year 1; 8,050 hours in year 2; and 8,200 hours in year 3. Calculate the net book value at the end of the third year.
A machine with a cost of $65,178.00 has an estimated residual value of $4,473.00 and an...
A machine with a cost of $65,178.00 has an estimated residual value of $4,473.00 and an estimated life of 6 years or 18,863 hours. It is to be depreciated by the units-of-production method. What is the amount of depreciation for the second full year, during which the machine was used 4,557 hours? Select the correct answer. $20,235.00 $15,745.97 $10,117.50 $14,665.36
P21-6 (Lessee-Lessor Entries, Finance Lease with a Guaranteed Residual Value) (LO 2, 4) Glaus Leasing Company...
P21-6 (Lessee-Lessor Entries, Finance Lease with a Guaranteed Residual Value) (LO 2, 4) Glaus Leasing Company agrees to lease equipment to Jensen Corporation on January 1, 2017. The following information relates to the lease agreement. 1.The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years. 2.The cost of the machinery is $525,000, and the fair value of the asset on January 1, 2017, is $700,000. 3.At the...
On June 30, a machine with a useful life of 10 years and a residual value...
On June 30, a machine with a useful life of 10 years and a residual value of $10,000 was purchased for $75,000. What is the depreciation expense for year 2 under straight line depreciation? A. 6,500 B. 13,000 Not sure if the question is looking for just the expense for year 2 which would be $6,500, or the accumulated depreciation expense of all the years up until year 2 which would then be $13,000.
Find the interest paid on a 2-year lease for a $29,334 car if the car's residual...
Find the interest paid on a 2-year lease for a $29,334 car if the car's residual value is $18,469 and the lease has an annual interest rate of 5.3%. Round your answer to the nearest dollar. Find the interest paid on a 2-year lease for a $29,537 car if the car depreciates at an annual rate of 13% and the lease has an annual interest rate of 3.7%. Round your answer to the nearest dollar.
A machine that cost $400,000 has an estimated residual value of $40,000 and an estimated useful...
A machine that cost $400,000 has an estimated residual value of $40,000 and an estimated useful life of four years. The company uses double-declining-balance depreciation. Required: 1. Calculate the machine's depreciable cost. 2. Calculate the machine's depreciation expense for each year. 3. Calculate the machine's accumulated depreciation and book value at the end of each year.
Sales –Type Lease with Residual Value. On January 1, 2019, Rainbow Corp. leased a piece of...
Sales –Type Lease with Residual Value. On January 1, 2019, Rainbow Corp. leased a piece of production equipment from Steelhead Company under a 6-year lease, with payments due at the beginning of each year. Steelhead manufactured the equipment at a cost of $400,000 and its typical sales price is $500,000. The annual Lease payment was computed based on an implicit interest rate of 4%. Because its useful life is 8 years, there is an expected residual value of the equipment...
Would higher residual value risk make a company more or less likely to lease an asset?...
Would higher residual value risk make a company more or less likely to lease an asset? Why?
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT