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Air Atlantic (AA) has been offered a 3-year old jet airliner under a 12-year lease arrangement. The lease requires AA to make annual lease payments of $500,000 at the beginning of each of the next 12 years. Determine the
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- An industrial engineering consulting firm signed a lease agreement for simulation software. Calculate the present worth in year 0 if the lease requires a payment of $30,000 now and amounts increasing by 5% per year through year 7. Use an interest rate of 10% per year.The lessor company signs a lease agreement on December 31, 2020 to lease equipment to the lessee company. The term of the non-cancelable lease is 8 years, and yearly rental payment of $87,000 is required at the end of each year, beginning on December 31, 2020. The agreement specifies that the unguaranteed residual value is $42,000. The lessor expects to earn a return of 10% on its investment. The equipment has a useful economic life of 10 years. What is the amount of lease receivable the lessor will record on December 31, 2020? (You must choose from the following present/future values. Please do not use the tables in the textbook, tables posted on the Blackboard, or values from a financial calculator.) Future Value Single Sum Present Value Single Sum Future Value Ordinary Annuity Present Value Ordinary Annuity Present Value Annuity Due 10%, 8 periods 2.14 0.47 11.44 5.33 5.87 10%, 10 periods 2.59 0.39 15.94 6.14 6.76A vehicle can be purchased by paying $18,000 now, or it can be leased by paying $515 per month for the next three years, with the first payment due on the day of signing the lease. What nominal annual rate of interest compounded monthly is charged on the lease?
- Subject: Financial strategy & policy 1) A leasing contract calls for an immediate payment of $100,000 and nine subsequent $100,000 semiannual payments at six month intervals. What is the PV of these payments if the annual discount rate is 8 percent? 2) Siegefried Basset is 65 years of age and has a life expectancy of 12 more years. He wishes to invest $20,000 in an annuity that will make a level payment at the end of each year until his death. If the interest rate is 8 percent, what income can Mr. Basset to receive each year?Use the 5 lease criteria to determine if the following lease qualifies as a Capital, Financing lease. The Sirap Co leased equipment from the lessee valued at $400,000. The lease contract has payments of $50,000 per year payable at the end of each year for 12 years. The interest rate is at 8%. The lessor will repossess the equipment at the end of the lease term. The leased equipment does not have a bargain purchase option. The leased equipment has an economic useful life of 16 years. Required: use the 5 criteria, like in illustration 15 - 4 to determine if the lease qualifies as a Capital, financing lease.On June 30, 2024, Georgia-Atlantic, Incorporated leased warehouse equipment from IC Leasing Corporation. The lease agreement calls for Georgia-Atlantic to make semiannual lease payments of $509,761 over a five-year lease term (also the asset's useful life). payable each June 30 and December 31, with the first payment on June 30, 2024. Georgia-Atlantic's Incremental borrowing rate is 8% the same rate IC used to calculate lease payment amounts. IC purchased the equipment from Builders, Incorporated at a cost of $4.3 million. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1. FVAD of $1 and PVAD of $1) Required: 1. What amount related to the lease would IC report In Its balance sheet on December 31, 2024 (Ignore taxes)? 2. What amount related to the lease would IC report in its Income statement for the year ended December 31, 2024 (Ignore taxes)? Note: For all requirements, enter your answers in whole dollars and not in millions. Round the…
- A finance lease agreement calls for quarterly lease payments of $5,376 over a 10-year lease term, with the first payment on July 1, the beginning of the lease. The annual interest rate is 8%. Both the present value of the lease payments and the cost of the asset to the lessor are $150,000. Required: Prepare a partial amortization table up to the October 1 payment. What would be the amount of interest expense (revenue) the lessee (lessor) would record in conjunction with the second quarterly payment on October 1?The Olsen Company has decided to acquire a new truck. One alternativeis to lease the truck on a 4-year contract for a lease payment of $10,000 per year, withpayments to be made at the beginning of each year. The lease would include maintenance.Alternatively, Olsen could purchase the truck outright for $40,000, financing with a bankloan for the net purchase price, amortized over a 4-year period at an interest rate of 10%per year, payments to be made at the end of each year. Under the borrow-to-purchasearrangement, Olsen would have to maintain the truck at a cost of $1,000 per year, payableat year-end. The truck falls into the MACRS 3-year class. The applicable MACRS depreciationrates are 33%, 45%, 15%, and 7%. The truck has a salvage value of $10,000, which is theexpected market value after 4 years, at which time Olsen plans to replace the truck regardlessof whether the firm leases the truck or purchases it. Olsen has a federal-plus-state taxrate of 40%.a. What is Olsen’s PV cost of…On June 30, 2024, Blue, Incorporated leased a machine from Big Leasing Corporation. The lease agreement qualifies as a finance lease and calls for Blue to make semiannual lease payments of $212,190 over a four-year lease term, payable each June 30 and December 31, with the first payment on June 30, 2024. Blue’s incremental borrowing rate is 10%, the same rate Big uses to calculate lease payment amounts. Determine the present value of the lease payments on June 30, 2024, that Blue uses to record the right-of-use asset and lease liability. What would be the amounts related to the lease that Blue would report in its balance sheet at December 31, 2024? (Ignore taxes.) What would be the amounts related to the lease that Blue would report in its income statement for the year ended December 31, 2024? (Ignore taxes.)
- Refer to the following lease amortization schedule. The five payments are made annually starting with the beginning of the lease. A $1,500 purchase option is reasonably certain to be exercised at the end of the five-year lease. The asset has an expected economic life of eight years. Lease Cash Effective Decrease in Outstanding Payment Payment Interest Balance Balance 40,860 31,960 24,978 17,577 9,731 ?? 0 1 2 3 4 5 6 8,900 8,900 8,900 8,900 8,900 1,500 Multiple Choice $46,000 ?? 1,918 1,499 1,055 What is the total interest paid over the term of the lease? $2.760 ?? 85 ?? 6,982 7,401 7,845 ?? 1,415Red Sun Rising Corporation has just signed a lease for its new manufacturing facility. The lease agreement calls for annual payments of $1,850,000 for 20 years with the first payment due today. If the interest rate is 3.55 percent, what is the value of this liability today?The lessor company signs a sales-type lease agreement on January 1, 2020 to lease equipment to the lessee company. The term of the non-cancelable lease is 8 years, and yearly rental payment of $63,000 is required at the end of each year, beginning on December 31, 2020. The agreement specifies that the unguaranteed residual value is $44,000. The lessor expects to earn a return of 8% on its investment. What is the amount of sales the lessor will record on January 1, 2020? (You must choose from the following present/future values. Please do not use the tables in the textbook, tables posted on the Blackboard, or values from a financial calculator.) Future Value Single Sum Present Value Single Sum Future Value Ordinary Annuity Present Value Ordinary Annuity Present Value Annuity Due 8%, 8 periods 1.85 0.54 10.64 5.75 6.21