Haystack, Inc. manufactures machinery used in the mining industry. On January 2021 the leased equipment with a cost of $480,000 to Silver Point Co. The 5-year se calls for a 10% down payment and equal annual payments at the end of each r. The equipment has an expected useful life of 5 years. Silver Point's incremental Towing rate is 10%, and it depreciates similar equipment using the double- ining balance method. The selling price of the equipment is $780,000, and the implicit in the lease is 8%, which is known to Silver Point Co. What is the amount terest expense recorded by Silver Point Co. for the year ended December 31, 1? PV Annuity Due PV Ordinary Annuity 4.31213 le Sum 8%, 5 periods 68508 10%, 5 periods 62092 0,200 6,160 2,400 8.000 4.16986 -12- 3.99271 3.79079 PV

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
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39. Haystack, Inc. manufactures machinery used in the mining industry. On January
2, 2021 the leased equipment with a cost of $480,000 to Silver Point Co. The 5-year
lease calls for a 10% down payment and equal annual payments at the end of each
year. The equipment has an expected useful life of 5 years. Silver Point's incremental
borrowing rate is 10%, and it depreciates similar equipment using the double-
declining balance method. The selling price of the equipment is $780,000, and the
rate implicit in the lease is 8%, which is known to Silver Point Co. What is the amount
of interest expense recorded by Silver Point Co. for the year ended December 31,
2021?
PV Annuity Due
PV Ordinary Annuity
Single Sum
8%, 5 periods
68508
10%, 5 periods
62092
a. $70,200
b. $56,160
c. $62,400
d. $78,000
4.31213
4.16986
-12-
3.99271
3.79079
PV
21
Transcribed Image Text:39. Haystack, Inc. manufactures machinery used in the mining industry. On January 2, 2021 the leased equipment with a cost of $480,000 to Silver Point Co. The 5-year lease calls for a 10% down payment and equal annual payments at the end of each year. The equipment has an expected useful life of 5 years. Silver Point's incremental borrowing rate is 10%, and it depreciates similar equipment using the double- declining balance method. The selling price of the equipment is $780,000, and the rate implicit in the lease is 8%, which is known to Silver Point Co. What is the amount of interest expense recorded by Silver Point Co. for the year ended December 31, 2021? PV Annuity Due PV Ordinary Annuity Single Sum 8%, 5 periods 68508 10%, 5 periods 62092 a. $70,200 b. $56,160 c. $62,400 d. $78,000 4.31213 4.16986 -12- 3.99271 3.79079 PV 21
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