Ahemka Corporation is a manufacturer of medical equipment's. On January 1, 2010, Ahemka Corporation leases electronic equipment to Eagle Company. The following information about the lease and the equipment is provided: · The term of the non-cancelable lease is 5 years. • The agreement requires equal rental payments of €250 per year at the beginning of each year. • The fair value of the equipment on January 1, 2010 is €1000. • The equipment has an estimated economic life of 6 years, and no residual value. • The yearly rental payment includes €30 of executory costs related to insurance on the equipment. • The incremental borrowing rate of Ahemka Corporation is 8% a year.
Ahemka Corporation is a manufacturer of medical equipment's. On January 1, 2010, Ahemka Corporation leases electronic equipment to Eagle Company. The following information about the lease and the equipment is provided: · The term of the non-cancelable lease is 5 years. • The agreement requires equal rental payments of €250 per year at the beginning of each year. • The fair value of the equipment on January 1, 2010 is €1000. • The equipment has an estimated economic life of 6 years, and no residual value. • The yearly rental payment includes €30 of executory costs related to insurance on the equipment. • The incremental borrowing rate of Ahemka Corporation is 8% a year.
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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Discuss the type of the lease arrangement to eagle company and calculate the
Transcribed Image Text:Ahemka Corporation is a manufacturer of medical
equipment's. On January 1, 2010, Ahemka Corporation
leases electronic equipment to Eagle Company. The
following information about the lease and the
equipment is provided:
· The term of the non-cancelable lease is 5 years.
• The agreement requires equal rental payments of €250
per year at the beginning of each year.
• The fair value of the equipment on January 1, 2010 is
€1000.
• The equipment has an estimated economic life of 6
years, and no residual value.
• The yearly rental payment includes €30 of executory
costs related to insurance on the equipment.
• The incremental borrowing rate of Ahemka
Corporation is 8% a year.
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