Answer:
Task 1:
Determine the required lease payment if the lease agreement calls for 10 equal annual payments beginning immediately.
Answer: $140,100
Task 2:
Determine the required lease payment if the first of 10 annual payments will be made one year from the date of the agreement:
Answer: $152,696
Task 3:
Determine the required lease payment if the first of 10 annual payments will be made immediately and Benning will be able to sell the machine to another customer for $68,000 at the end of the 10-year lease.
Answer: $148,224
Explanation:
Machine price = $980,000
Annual interest rate = 9%
Task 1:
Lease payment, if the 10 payments begin immediately:
= $980,000/1+5.995 = $140,100
Task 2:
Lease payments, if the first of 10 annual payments will be made one year from the date of the agreement:
$980,000/6.418 = $152,696
Task 3:
Present value = $980,000
Period = 10
Rate = 9%
Residual value = $68,000
Present value of residual = $68,000* PV(9%,10) = $68,000*0.422 (from present value table) = $28,696
Annual payment = ($980,000 - $28,696)/PV(9%,10)
Annual payment = $951,304/6.418 = $148,224
