Calculate the amount of the annual rental payment required.
(Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,972.)
| Annual rental payment ???? |
Carla Leasing Company agrees to lease equipment to Sarasota Corporation on January 1, 2020. The following information relates to the lease agreement.
| 1. | | The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years. |
| 2. | | The cost of the machinery is $517,000, and the fair value of the asset on January 1, 2020, is $657,000. |
| 3. | | At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $55,000. Sarasota estimates that the expected residual value at the end of the lease term will be 55,000. Sarasota amortizes all of its leased equipment on a straight-line basis. |
| 4. | | The lease agreement requires equal annual rental payments, beginning on January 1, 2020. |
| 5. | | The collectibility of the lease payments is probable. |
| 6. | | Carla desires a 10% rate of return on its investments. Sarasotas incremental borrowing rate is 11%, and the lessors implicit rate is unknown. |
(Assume the accounting period ends on December 31.)
Future Value of 1 (Future Value of a Single Sum) 9% 10% 11% 12% 8% 15% (n) Periods 1.08000 1.16640 1.25971 1.36049 1.46933 1.09000 1.18810 1.29503 1.41158 1.53862 1.10000 1.21000 1.33100 1.46410 1.61051 1.11000 1.23210 1.36763 1.51807 1.68506 1.12000 1.25440 1.40493 1.57352 1.76234 1.15000 1.32250 1.52088 1.74901 2.01136 1 2 3 4 5 7 1.58687 1.71382 1.85093 1.99900 2.15892 1.67710 1.82804 1.99256 2.17189 2.36736 1.77156 1.94872 2.14359 2.35795 2.59374 1.87041 2.07616 2.30454 2.55803 2.83942 1.97382 2.21068 2.47596 2.77308 3.10585 2.31306 2.66002 3.05902 3.51788 4.04556 8 9 10 2.33164 2.51817 2.71962 2.93719 3.17217 2.58043 2.81267 3.06581 3.34173 3.64248 2.85312 3.13843 3.45227 3.79750 4.17725 3.15176 3.49845 3.88328 4.31044 4.78459 3.47855 3.89598 4.36349 4.88711 5.47357 4.65239 5.35025 6.15279 7.07571 8.13706 11 12 13 14 15 Present Value of 1 (Present Value of a Single Sum) 9% 10% 11% 12% 8% 15% (n) Periods .92593 .85734 .79383 .73503 .68058 .91743 .84168 .77218 .70843 .64993 .90909 .82645 .75132 .68301 .62092 .90090 .81162 .73119 .65873 .59345 .89286 .79719 .71178 .63552 .56743 .86957 .75614 .65752 .57175 .49718 1 2 3 4 5 6 7 .63017 .58349 .54027 .50025 46319 .59627 54703 .50187 .46043 42241 .56447 .51316 .46651 .42410 38554 .53464 .48166 43393 .39092 .35218 .50663 45235 40388 .36061 2197 .43233 .37594 .32690 .28426 .24719 9 10 42888 .39711 .36770 .34046 .31524 .38753 .35554 .32618 .29925 .27454 .35049 .31863 28966 26333 .23939 .31728 .28584 .25751 .23199 20900 28748 .25668 .22917 20462 .18270 .21494 .18691 .16253 .14133 .12289 11 12 13 14 15 8% 12% 15% 1.00000 2.08000 3.24640 4.50611 5.86660 Future Value of an Ordinary Annuity of 1 9% 10% 11% 1.00000 1.00000 1.00000 2.09000 2.10000 2.11000 3.27810 3.31000 3.34210 4.57313 4.64100 4.70973 5.98471 6.10510 6.22780 1.00000 2.12000 3.37440 4.77933 6.35285 1.00000 2.15000 3.47250 4.99338 6.74238 (n) Periods 1 2 3 4 5 7.33592 8.92280 10.63663 12.48756 14.48656 7.52334 9.20044 11.02847 13.02104 15.19293 7.71561 9.48717 11.43589 13.57948 15.93743 7.91286 9.78327 11.85943 14.16397 16.72201 8.11519 10.08901 12.29969 14.77566 17.54874 8.75374 11.06680 13.72682 16.78584 20.30372 6 7 8 9 10 16.64549 18.97713 21.49530 24.21492 27.15211 17.56029 20.14072 22.95339 26.01919 29.36092 18.53117 21.38428 24.52271 27.97498 31.77248 19.56143 22.71319 26.21164 30.09492 34.40536 20.65458 24.13313 28.02911 32.39260 37.27972 24.34928 29.00167 34.35192 40.50471 47.58041 11 12 13 14 15 8% Present Value of an Ordinary Annuity of 1 9% 10% 11% 12% 15% (n) Periods 1 .92593 1.78326 2.57710 3.31213 3.99271 .91743 1.75911 2.53130 3.23972 3.88965 .90909 1.73554 2.48685 3.16986 3.79079 .90090 1.71252 2.44371 3.10245 3.69590 .89286 1.69005 2.40183 3.03735 3.60478 .86957 1.62571 2.28323 2.85498 3.35216 2 3 4 5 4.62288 5.20637 5.74664 6.24689 6.71008 4.48592 5.03295 5.53482 5.99525 6.41766 4.35526 4.86842 5.33493 5.75902 6.14457 4.23054 4.71220 5.14612 5.53705 5.88923 4.11141 4.56376 4.96764 5.32825 5.65022 3.78448 4.16042 4.48732 4.77158 5.01877 6 7 8 9 10 7.13896 7.53608 7.90378 8.24424 8.55948 6.80519 7.16073 7.48690 7.78615 8.06069 6.49506 6.81369 7.10336 7.36669 7.60608 6.20652 6.49236 6.74987 6.98187 7.19087 5.93770 6.19437 6.42355 6.62817 6.81086 5.23371 5.42062 5.58315 5.72448 5.84737 11 12 13 14 15 8% 12% 15% (n) Periods 1.00000 1.92593 2.78326 3.57710 4.31213 Present Value of an Annuity Due of 1 9% 10% 11% 1.00000 1.00000 1.00000 1.91743 1.90909 1.90090 2.75911 2.73554 2.71252 3.53130 3.48685 3.44371 4.23972 4.16986 4.10245 1.00000 1.89286 2.69005 3.40183 4.03735 1.00000 1.86957 2.62571 3.28323 3.85498 1 2 3 4 5 4.99271 5.62288 6.20637 6.74664 7.24689 4.88965 5.48592 6.03295 6.53482 6.99525 4.79079 5.35526 5.86842 6.33493 6.75902 4.69590 5.23054 5.71220 6.14612 6.53705 4.60478 5.11141 5.56376 5.96764 6.32825 4.35216 4.78448 5.16042 5.48732 5.77158 6 7 8 9 10 7.71008 8.13896 8.53608 8.90378 9.24424 7.41766 7.80519 8.16073 8.48690 8.78615 7.14457 7.49506 7.81369 8.10336 8.36669 6.88923 7.20652 7.49236 7.74987 7.98187 6.65022 6.93770 7.19437 7.42355 7.62817 6.01877 6.23371 6.42062 6.58315 6.72448 11 12 13 14 15
