Splish Brothers Company is negotiating to lease a piece of equipment to Sunland, Inc. Sunland requests that the lease be for 9 years. The equipment has a useful life of 10 years. Splish Brothers wants a guarantee that the residual value of the equipment at the end of the lease is at least $4,000. Sunland agrees to guarantee a residual value of this amount though it expects the residual value of the equipment to be only $2,000 at the end of the lease term. If the fair value of the equipment at lease commencement is $120,000, what would be the amount of the annual rental payments Splish Brothers demands of Sunland, assuming each payment will be made at the beginning of each year and Splish Brothers wishes to earn a rate of return on the lease of 11% ? (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answer to O decimal places, eg. 5,275.) Click here to view factor tables. Amount of equal annual lease payments $ 20291
Splish Brothers Company is negotiating to lease a piece of equipment to Sunland, Inc. Sunland requests that the lease be for 9 years. The equipment has a useful life of 10 years. Splish Brothers wants a guarantee that the residual value of the equipment at the end of the lease is at least $4,000. Sunland agrees to guarantee a residual value of this amount though it expects the residual value of the equipment to be only $2,000 at the end of the lease term. If the fair value of the equipment at lease commencement is $120,000, what would be the amount of the annual rental payments Splish Brothers demands of Sunland, assuming each payment will be made at the beginning of each year and Splish Brothers wishes to earn a rate of return on the lease of 11% ? (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answer to O decimal places, eg. 5,275.) Click here to view factor tables. Amount of equal annual lease payments $ 20291
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Splish Brothers Company is negotiating to lease a piece of equipment to Sunland, Inc. Sunland requests that the lease be for 9 years.
The equipment has a useful life of 10 years. Splish Brothers wants a guarantee that the residual value of the equipment at the end of
the lease is at least $4,000. Sunland agrees to guarantee a residual value of this amount though it expects the residual value of the
equipment to be only $2,000 at the end of the lease term.
If the fair value of the equipment at lease commencement is $120,000, what would be the amount of the annual rental payments
Splish Brothers demands of Sunland, assuming each payment will be made at the beginning of each year and Splish Brothers wishes to
earn a rate of return on the lease of 11% ? (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round
final answer to O decimal places, eg. 5,275.)
Click here to view factor tables.
Amount of equal annual lease payments
$
20291
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