The Hardaway Corporation plans to lease a $920,000 asset to the O’Neil Corporati
ID: 2765812 • Letter: T
Question
The Hardaway Corporation plans to lease a $920,000 asset to the O’Neil Corporation. The lease will be for 10 years. Use Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods.
If the Hardaway Corporation desires a return of 14 percent on its investment, how much should the lease payments be? (Do not round intermediate calculations and round your answer to 2 decimal places.)
If the Hardaway Corporation is able to take a 10 percent deduction from the purchase price of $920,000 and will pass the benefits along to the O’Neil Corporation in the form of lower lease payments (related to the Hardaway Corporation in the form of lower initial net cost), how much should the revised lease payments be? The Hardaway Corporation desires a return of 14 percent on the 10-year lease. (Do not round intermediate calculations and round your answer to 2 decimal places.)
The Hardaway Corporation plans to lease a $920,000 asset to the O’Neil Corporation. The lease will be for 10 years. Use Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods.
Explanation / Answer
A=PV/PVIFA(i=14% n=10)
Using Appendix D
=$920000/5.216
=$176,380.37
Original amount =$920,000
-10% =$ 92,000
Net cost =$828,000
A =$828,000/5.216
=$158,742.33
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