FOUR Inc. leases computer equipment to customers under a direct financing lease. The equipment has no residual value at the end of the lease and the leases do not contain bargain purchase options. FOUR wishes to earn 8% interest on a 5-year lease of equipment with a fair value of P323,400. The present value of an annuity due of 1 at 8% for 5 years is 4.312.

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Leasing

Leasing is a contractual arrangement in which someone (a lessee) pays the owner (or lessor) of a building, land, vehicle, or other asset for the use of that asset. The lease is the agreement between lessee and lessor.