A construction company agreed to lease payments of $622.77 on construction equipment to be made at the end of every three months for 9.75 years. Financing is at 7% compounded quarterly.(a) What is the value of the original lease contract?(b) If, due to delays, the first 6 payments were deferred, how much money would be needed after 7 payments to bring the lease payments up to date?(c) How much money would be required to pay off the lease after 7 payments?(d) If the lease were paid off after 7 payments, what would the total interest be?(e) How much of the total interest would be due to deferring the first 6 payments?(a) The value of the original lease contract is S|(Round the final answer to the nearest cent as needed. Round all intermediate values to six decimal places as needed.)(b) The company would have to pay $(Round the final answer to the nearest cent as needed. Round all intermediate values to six decimal places as needed.)(c) The company would need $(Round the final answer to the nearest cent as needed. Round all intermediate values to six decimal places as needed.)(d) The interest would be S.(Round the final answer to the nearest cent as needed. Round all intermediate values to six decimal places as needed.)(e) The interest resulting from the deferral is S(Round the final answer to the nearest cent as needed. Round all intermediate values to six decimal places as needed.)

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Answered: A construction company agreed to lease…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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A lease agreement that qualifies as a finance lease calls for annual lease payments of $26,269 over a six-year lease term (also the asset’s useful life), with the first payment on January 1, the beginning of the lease. The interest rate is 5%. Required: Complete the amortization schedule for the first two payments. If the lessee’s fiscal year is the calendar year, what would be the amount of the lease liability that the lessee would report in its balance sheet at the end of the first year? What would be the interest payable?
5. On June 30, year 1, Menchen, Inc. leased equipment from Davis Leasing. The lease agreement calls for Menchen to make semiannual lease payments of $ 400, 500 over a seven- year lease term, on June 30 and December 31. This is also the assets useful life. The first payment was due immediately on June 30, year 1. The interest rate used is the incremental borrowing rate of 11%. The cost of the asset to Davis was $ 4,051,891 using a factor of 10.11708. a. using an amortization table what amount would Davis show on its balance sheet on December 31, year 1? b. what amount would Davis show on its income statement on December 31,year 1?
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