Teal Mountain Inc. wishes to lease machinery to Sandhill Company. Sandhill wants the machinery for 4 years, although it has a useful life of 10 years. The machinery has a fair value at the commencement of the lease of $40,000, and Teal Mountain expects the machinery to have a residual value at the end of the lease term of $28,000. However, Sandhill does not guarantee any part of the residual value. Sandhill does expect that the residual value will be $38,000 instead of $28,000. What would be the amount of the annual rental payments Teal Mountain demands of Sandhill, assuming each payment will be made at the end of each year and Teal Mountain wishes to earn a rate of return on the lease of 6% ? (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answer to O decimal places, e.g. 5,275.) Click here to view factor tables. Amount of equal annual lease payments $ EA 4,784
Teal Mountain Inc. wishes to lease machinery to Sandhill Company. Sandhill wants the machinery for 4 years, although it has a useful life of 10 years. The machinery has a fair value at the commencement of the lease of $40,000, and Teal Mountain expects the machinery to have a residual value at the end of the lease term of $28,000. However, Sandhill does not guarantee any part of the residual value. Sandhill does expect that the residual value will be $38,000 instead of $28,000. What would be the amount of the annual rental payments Teal Mountain demands of Sandhill, assuming each payment will be made at the end of each year and Teal Mountain wishes to earn a rate of return on the lease of 6% ? (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answer to O decimal places, e.g. 5,275.) Click here to view factor tables. Amount of equal annual lease payments $ EA 4,784
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Teal Mountain Inc. wishes to lease machinery to Sandhill Company. Sandhill wants the machinery for 4 years, although it has a useful
life of 10 years. The machinery has a fair value at the commencement of the lease of $40,000, and Teal Mountain expects the
machinery to have a residual value at the end of the lease term of $28,000. However, Sandhill does not guarantee any part of the
residual value. Sandhill does expect that the residual value will be $38,000 instead of $28,000.
What would be the amount of the annual rental payments Teal Mountain demands of Sandhill, assuming each payment will be made at
the end of each year and Teal Mountain wishes to earn a rate of return on the lease of 6% ? (For calculation purposes, use 5 decimal places
as displayed in the factor table provided and round final answer to O decimal places, e.g. 5,275.)
Click here to view factor tables.
Amount of equal annual lease payments
$
EA
4,784
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