Finance Lease, Lessee, Lessor, Guaranteed Residual Value. VJ Leasing Company recently leased machinery to Berg Building Associates. The 5-year lease contract requires rental payments of $20,000 on January 1 of each year. The lease meets at least one of the Group I criteria. The 9% implicit rate on the lease is known to Berg Building Associates. There is a $5,000 guaranteed residual value by the lessee, which is equal to the expected residual value at the end of the lease term. Therefore, there is no unguaranteed residual asset. Compute the present value of the lease payments for VJ Leasing Company and Berg Building.
Finance Lease, Lessee, Lessor, Guaranteed Residual Value. VJ Leasing Company recently leased machinery to Berg Building Associates. The 5-year lease contract requires rental payments of $20,000 on January 1 of each year. The lease meets at least one of the Group I criteria. The 9% implicit rate on the lease is known to Berg Building Associates. There is a $5,000 guaranteed residual value by the lessee, which is equal to the expected residual value at the end of the lease term. Therefore, there is no unguaranteed residual asset. Compute the present value of the lease payments for VJ Leasing Company and Berg Building.
Solution Summary: The author explains that lease is a long term rent agreement between two parties that is often clubbed with other clauses relating to maintenance or sale at the end of the lease period.
Finance Lease, Lessee, Lessor, Guaranteed Residual Value. VJ Leasing Company recently leased machinery to Berg Building Associates. The 5-year lease contract requires rental payments of $20,000 on January 1 of each year. The lease meets at least one of the Group I criteria. The 9% implicit rate on the lease is known to Berg Building Associates. There is a $5,000 guaranteed residual value by the lessee, which is equal to the expected residual value at the end of the lease term. Therefore, there is no unguaranteed residual asset. Compute the present value of the lease payments for VJ Leasing Company and Berg Building.
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