Tiner Leasing Company purchased specialized equipment from Fred Company on December 31, 2019 for $800,000. On...

Tiner Leasing Company purchased specialized equipment from Fred

Company on December 31, 2019 for $800,000. On the same date, it leased this equipment to Tears Company for 6 years, the useful life of the equipment. The lease payments begin January 1, 2020 and are made every 6 months. Tiner Leasing wants to earn 9% annually on its investment.

(a) Calculate the amount of each rent. $ __________

(b) How much interest revenue will Tiner earn in 2020? $ __________

Solutions

Expert Solution

The Amount of each rent = $87,732.95

Interest revenue in the year 2020 (i.e.for first 2 periods) = $36000+$33672=$69,672

(Explanation to the answer is given below)

Period	Payment	Principal Part	Interest Part	Balance
1	$87,732.95	$ 51,732.95	$ 36,000.00	$748,267.05
2	$87,732.95	$ 54,060.93	$ 33,672.02	$694,206.12
3	$87,732.95	$ 56,493.67	$ 31,239.28	$637,712.45
4	$87,732.95	$ 59,035.89	$ 28,697.06	$578,676.56
5	$87,732.95	$ 61,692.51	$ 26,040.44	$516,984.05
6	$87,732.95	$ 64,468.67	$ 23,264.28	$452,515.38
7	$87,732.95	$ 67,363.76	$ 20,369.19	$385,145.62
8	$87,732.95	$ 70,401.40	$ 17,331.55	$314,744.22
9	$87,732.95	$ 73,569.46	$ 14,163.49	$241,174.76
10	$87,732.95	$ 76,880.09	$ 10,852.86	$164,294.67
11	$87,732.95	$ 80,339.69	$ 7,393.26	$83,954.98
12	$87,732.95	$ 83,954.98	$ 3,777.97	($0.00)

The monthly payment is derived by using the formula EMI = [P x R x (1+R)^N]/[(1+R)^N-1]

=>EMI= 800000*4.5%*((1+4.5%)^12)/((1+4.5%)^12-1)

=>$87,732.95

ekkarill92 answered 5 months ago

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