Type of property Cabinet Yearly reantal $ 6,000 Lease term (year) 20 Estimated e
ID: 2556047 • Letter: T
Question
Type of property Cabinet Yearly reantal $ 6,000 Lease term (year) 20 Estimated economic life 30 purchase option None Renewal option None Fair Value atcommencement of
lease $ 75,000 Cost of asset to lessor $ 60,000 Residual Value
Guaranteed 0 Unguaranteed $ 35,000 incremental
borrowing rate of
lessee 8% What is the present value of the rental payments? show your work please. Type of property Cabinet Yearly reantal $ 6,000 Lease term (year) 20 Estimated economic life 30 purchase option None Renewal option None Fair Value at
commencement of
lease $ 75,000 Cost of asset to lessor $ 60,000 Residual Value
Guaranteed 0 Unguaranteed $ 35,000 incremental
borrowing rate of
lessee 8% What is the present value of the rental payments? show your work please.
Explanation / Answer
Calculation of Present Value of Rental Payments:- Lease Term 20 Years Yearly Rental $ 6,000.00 Discounting Factor 8% Annuity Factor @8 % for 20 years 11.2578 Thus, PV of Rental Payments ( 11.2578 * 6,000) $ 67,546.80
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