Larkspur Company is negotiating to lease a piece of equipment to Crane, Inc. Crane requests that the lease be for 9 years. The equipment has a useful life of 10 years. Larkspur wants a guarantee that the residual value of the equipment at the end of the lease is at least $4,000. Crane 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 $75,000, what would be the amount of the annual rental payments Larkspur demands of Crane, assuming each payment will be made at the beginning of each year and Larkspur wishes to earn a rate of return on the lease of 9%? (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 SA
Larkspur Company is negotiating to lease a piece of equipment to Crane, Inc. Crane requests that the lease be for 9 years. The equipment has a useful life of 10 years. Larkspur wants a guarantee that the residual value of the equipment at the end of the lease is at least $4,000. Crane 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 $75,000, what would be the amount of the annual rental payments Larkspur demands of Crane, assuming each payment will be made at the beginning of each year and Larkspur wishes to earn a rate of return on the lease of 9%? (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 SA
Chapter19: Lease And Intermediate-term Financing
Section: Chapter Questions
Problem 1P
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