On January 1, 2017, Pina Corporation signed a 3-year noncancelable lease for several computers. The terms of the lease called for Pina to make annual payments of $3,200 at the beginning of each year, starting January 1, 2017. The computers have an estimated useful life of 3 years and a $590 unguaranteed residual value. The computers revert back to the lessor at the end of the lease term. Pina uses the straight-line method of depreciation for all of its property, plant, and equipment. Pina’s incremental borrowing rate is 10%, and the lessor’s implicit rate is unknown. Compute the present value of the minimum lease payments
On January 1, 2017, Pina Corporation signed a 3-year noncancelable lease for several computers. The terms of the lease called for Pina to make annual payments of $3,200 at the beginning of each year, starting January 1, 2017. The computers have an estimated useful life of 3 years and a $590 unguaranteed residual value. The computers revert back to the lessor at the end of the lease term. Pina uses the straight-line method of depreciation for all of its property, plant, and equipment. Pina’s incremental borrowing rate is 10%, and the lessor’s implicit rate is unknown. Compute the present value of the minimum lease payments
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On January 1, 2017, Pina Corporation signed a 3-year noncancelable lease for several computers. The terms of the lease called for Pina to make annual payments of $3,200 at the beginning of each year, starting January 1, 2017. The computers have an estimated useful life of 3 years and a $590 unguaranteed residual value. The computers revert back to the lessor at the end of the lease term. Pina uses the straight-line method of depreciation for all of its property, plant, and equipment. Pina’s incremental borrowing rate is 10%, and the lessor’s implicit rate is unknown.
Compute the present value of the minimum lease payments
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