FRM Ltd acquired an item of equipment and enters into a non-cancellable lease agreement with FEN

Equipment Ltd on 1 January 2015. The lease consists of the following:

? Date of inception: 1/1/15

? Duration of lease: 4 years

? Life of leased asset: 5 years

? Lease payments (annual): $550 000 (annual) which includes $80 000 for

Maintenance and insurance costs per annum.

? Guaranteed residual value

(Added to final payment): $190 000

Interest rate: 7%

Formula for PV of $1 in n periods =