Question
i need help calculating the present value interest factor of an annuity. This is the question: On January 1, 2021, Yancey, Inc. signs a 10-year
i need help calculating the present value interest factor of an annuity. This is the question:
On January 1, 2021, Yancey, Inc. signs a 10-year noncancelable lease agreement to lease a storage building from Holt Warehouse Company. Collectibility of lease payments is reasonably predictable and no important uncertainties surround the amount of costs yet to be incurred by the lessor. The following information pertains to this lease agreement. (a) The agreement requires equal rental payments at the beginning each year. (b) The fair value of the building on January 1, 2021 is $6,000,000; however, the book value to Holt is $4,950,000. (c) The building has an estimated economic life of 10 years, with no residual value. Yancey depreciates similar buildings using the straight-line method. (d) At the termination of the lease, the title to the building will be transferred to the lessee. (e) Yanceys incremental borrowing rate is 11% per year. Holt Warehouse Co. set the annual rental to insure a 10% rate of return. The implicit rate of the lessor is known by Yancey, Inc. (f) The yearly rental payment includes $15,000 of executory costs related to taxes on the property.
1. What is the annual lease payment excluding executory costs? I know the present value interest factor is 6.759 but how did they get it? I basically need help finding the present value interest factor. When i look at the chart its a different number so I'm looking at the wrong charts. Can you show me how to work the formula because I'm coming up with the wrong answer.
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