Question
#6 In early 2017, McCormick County agreed to acquire a new recreation equipment storage facility under a capital lease agreement. At the inception of the
In early 2017, McCormick County agreed to acquire a new recreation equipment storage facility under a capital lease agreement. At the inception of the lease, a payment of $750,000 is made; four additional annual lease payments, each in the amount of $750,000, are to be made at the end of each year, beginning in late 2017. The total amount to be paid under this lease is $3,750,000.The county could borrow this amount for four years at an annual interest rate of 6%. Therefore, the present value of the lease at inception, including the initial payment, is $3,348,829. Assume that the fair value of the building at the inception of the lease is $3,600,000. Homework #6
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