ABC Company decided to enter the leasing business. The entity acquired a specialized packaging machine for P 2,300,000. On January 1,2020, the entity leased the machine for a period of six years, after which title to the machine is transferred to the lessee. The six annual lease payments are due each January 1 and the first payment was made on January 1,2020. The residual value of the machine is P 200,000. The lease terms are arranged so that a return of 12% is earned by the lessor. The present value of 1 at 12% for six periods is 0.51, the present value of an annuity in advance of 1 at 12% for six periods is 4.60 and the PV of an ordinary annuity of 1 at 12% for six periods is 4.11. What is the annual lease payment payable in advance required to yield the desired return? * O
ABC Company decided to enter the leasing business. The entity acquired a specialized packaging machine for P 2,300,000. On January 1,2020, the entity leased the machine for a period of six years, after which title to the machine is transferred to the lessee. The six annual lease payments are due each January 1 and the first payment was made on January 1,2020. The residual value of the machine is P 200,000. The lease terms are arranged so that a return of 12% is earned by the lessor. The present value of 1 at 12% for six periods is 0.51, the present value of an annuity in advance of 1 at 12% for six periods is 4.60 and the PV of an ordinary annuity of 1 at 12% for six periods is 4.11. What is the annual lease payment payable in advance required to yield the desired return? * O
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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35
Transcribed Image Text:ABC Company decided to enter the leasing business. The entity acquired a specialized
packaging machine for P 2,300,000. On January 1,2020, the entity leased the machine for a
period of six years, after which title to the machine is transferred to the lessee. The six annual
lease payments are due each January 1 and the first payment was made on January 1,2020.
The residual value of the machine is P 200,000. The lease terms are arranged so that a return
of 12% is earned by the lessor. The present value of 1 at 12% for six periods is 0.51, the
present value of an annuity in advance of 1 at 12% for six periods is 4.60 and the PV of an
ordinary annuity of 1 at 12% for six periods is 4.11.
What is the annual lease payment payable in advance required to yield the desired
return? *
O P 500,000
O P 477,826
O P 559,610
O P 460,000
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