Problem 21-05 (Part Level Submission) In 2019, Ivanhoe Trucking Company negotiated and closed a long-term lease contract for newly constructed truck terminals and freight storage facilities. The buildings were erected to the company’s specifications on land owned by the company. On January 1, 2020, Ivanhoe Trucking took possession of the lease properties. Although the terminals have a composite useful life of 40 years, the non-cancelable lease runs for 20 years from January 1, 2020, with a bargain purchase option available upon expiration of the lease. The 20-year lease is effective for the period January 1, 2020, through December 31, 2039. Rental payments of $848,000 are payable to the lessor on January 1 of each of the first 10 years of the lease term. Advance rental payments of $339,200 are due on January 1 for each of the last 10 years of the lease. The company has an option to purchase all of these leased facilities for $1 on December 31, 2039. The lease was negotiated to assure the lessor a 6% rate of return. Selected present value factors are as follows. Periods For an Ordinary Annuity of $1 at 6% For $1 at 6% 1 0.943396 0.943396 2 1.833393 0.889996 8 6.209794 0.627412 9 6.801692 0.591898 10 7.360087 0.558395 19 11.158116 0.330513 20 11.469921 0.311805 Prepare a schedule to compute for Ivanhoe Trucking the present value of the terminal facilities and related obligation at January 1, 2020. (Round answers to 0 decimal places, e.g. 125.) IVANHOE TRUCKING COMPANY Schedule to Compute the Discounted Present Value of Terminal Facilities and the Related Obligation January 1, 2020 Present value of first 10 payments: Immediate payment $enter a dollar amount Present value of an ordinary annuity enter a dollar amount $enter a total of the two previous amounts Present value of last 10 payments: First payment enter a dollar amount Present value of an ordinary annuity enter a dollar amount Present value of last 10 payments enter a total of the two previous amounts Discount to January 1, 2020 enter a dollar amount Discounted present value of terminal facilities and related obligation $enter a total of the two previous amounts

Problem 21-05 (Part Level Submission) In 2019, Ivanhoe Trucking Company negotiated and closed a long-term lease contract for newly constructed truck terminals and freight storage facilities. The buildings were erected to the company’s specifications on land owned by the company. On January 1, 2020, Ivanhoe Trucking took possession of the lease properties. Although the terminals have a composite useful life of 40 years, the non-cancelable lease runs for 20 years from January 1, 2020, with a bargain purchase option available upon expiration of the lease. The 20-year lease is effective for the period January 1, 2020, through December 31, 2039. Rental payments of $848,000 are payable to the lessor on January 1 of each of the first 10 years of the lease term. Advance rental payments of $339,200 are due on January 1 for each of the last 10 years of the lease. The company has an option to purchase all of these leased facilities for $1 on December 31, 2039. The lease was negotiated to assure the lessor a 6% rate of return. Selected present value factors are as follows. Periods For an Ordinary Annuity of $1 at 6% For $1 at 6% 1 0.943396 0.943396 2 1.833393 0.889996 8 6.209794 0.627412 9 6.801692 0.591898 10 7.360087 0.558395 19 11.158116 0.330513 20 11.469921 0.311805 Prepare a schedule to compute for Ivanhoe Trucking the present value of the terminal facilities and related obligation at January 1, 2020. (Round answers to 0 decimal places, e.g. 125.) IVANHOE TRUCKING COMPANY Schedule to Compute the Discounted Present Value of Terminal Facilities and the Related Obligation January 1, 2020 Present value of first 10 payments: Immediate payment $enter a dollar amount Present value of an ordinary annuity enter a dollar amount $enter a total of the two previous amounts Present value of last 10 payments: First payment enter a dollar amount Present value of an ordinary annuity enter a dollar amount Present value of last 10 payments enter a total of the two previous amounts Discount to January 1, 2020 enter a dollar amount Discounted present value of terminal facilities and related obligation $enter a total of the two previous amounts

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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Problem 21-05 (Part Level Submission)

In 2019, Ivanhoe Trucking Company negotiated and closed a long-term lease contract for newly constructed truck terminals and freight storage facilities. The buildings were erected to the company’s specifications on land owned by the company. On January 1, 2020, Ivanhoe Trucking took possession of the lease properties.

Although the terminals have a composite useful life of 40 years, the non-cancelable lease runs for 20 years from January 1, 2020, with a bargain purchase option available upon expiration of the lease.

The 20-year lease is effective for the period January 1, 2020, through December 31, 2039. Rental payments of $848,000 are payable to the lessor on January 1 of each of the first 10 years of the lease term. Advance rental payments of $339,200 are due on January 1 for each of the last 10 years of the lease. The company has an option to purchase all of these leased facilities for $1 on December 31, 2039. The lease was negotiated to assure the lessor a 6% rate of return.

Selected present value factors are as follows.

Periods	For an Ordinary Annuity of $1 at 6%	For $1 at 6%
1	0.943396		0.943396
2	1.833393		0.889996
8	6.209794		0.627412
9	6.801692		0.591898
10	7.360087		0.558395
19	11.158116		0.330513
20	11.469921		0.311805

Prepare a schedule to compute for Ivanhoe Trucking the present value of the terminal facilities and related obligation at January 1, 2020. (Round answers to 0 decimal places, e.g. 125.)

IVANHOE TRUCKING COMPANY Schedule to Compute the Discounted Present Value of Terminal Facilities and the Related Obligation January 1, 2020
Present value of first 10 payments:
Immediate payment	$enter a dollar amount
Present value of an ordinary annuity	enter a dollar amount	$enter a total of the two previous amounts

Present value of last 10 payments:
First payment	enter a dollar amount
Present value of an ordinary annuity	enter a dollar amount
Present value of last 10 payments	enter a total of the two previous amounts
Discount to January 1, 2020		enter a dollar amount
Discounted present value of terminal facilities and related obligation		$enter a total of the two previous amounts

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