Question
Dear professor, my question was like that: On January 1, 2018, Corp X issued 3%, 3 year Bonds to the public, and alsosigned a 3
Dear professor, my question was like that:
On January 1, 2018, Corp X issued 3%, 3 year Bonds to the public, and alsosigned a 3 and 1/2 -year lease with PH Corp. Payments of $10,000 on the lease are made at the end of the year for years 1,2 and3 and ($5,000 in the last period; year 4.) There are no provisions for a bargain purchase or an extension of the lease term. The asset has a fair value of $35,000 and has a useful economic life of 4 years.
Corp.X is rated as a BBB rated company by Moody's Investors-a rating company.DO NOT USE THE IRR AS THE LEASE INTEREST RATE for the lease calculations-use another interest rate
Additional Facts
1-BBB Market Interest rates:
Date of issueon 12/31/2019
Year 12%1.5%
Year 22.5%2.0%
Year 32.75%2.5%
Year 43,5%3.0%
Year 54.0%.4.0%
1-What is the implicit rate (IRR)on the lease?
2-What type of lease is this?
3-What is the balance sheet effects of this lease on 1/1/18 and 12/31/18?
4-what is the lease expense in 2018
5-Present the cash flow effects of this lease for 2018.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started