Information has been gathered for two leases: LEASE A The fair value of the equipment is $780,600 at the inception of the lease. The lease term is five years, and there is a three-year renewal term at the option of the lessor. Annual lease payments are $138,000 per year for the first five years and $122,000 for the next three years. Payments are due at the beginning of each lease year. All lease payments include the cost of insurance, estimated at $10,000 per year. The lessee has a residual guarantee value of $27,000 at the end of the eighth year. The lessee does not know the lessor's implicit rate of interest in the lease. The lessee's incremental borrowing rate is 10% LEASE B The fair value of the equipment is $613,500 at the inception of the lease. The lease term is five years. Annual lease payments are $138,000 per year. Payments are due at the beginning of each lease year. The lessee is offered a purchase option for the asset for $14,000 at the end of the lease term which is expected to be exercised. The lease payments include the cost of insurance, estimated at $10,000 per year. The lessor's implicit rate of interest in the lease is 8% is known to the lessee. The lessee's incremental borrowing rate is 10%. D. DO DO ED ES we w Wace KLCHIO WWW.ZONE wwww WE WON TO WOW SO MY W KIND St. ICO WWE WWE www w www www BUND OG SINGAR 650 GB www 2010 DECEMBER OSTRO WIE IS 100 MAIS OU MENOS W so CEWE WE UN ABLE 1-1: Present of TABLE 1-1: Present value of 1: (P/F, 1, ) 1 P/F = 1 2 4 5 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 2.5 39 0.98009 0.97561 0.97087 0.96154 0.96117 0.95181 0.94260 0.92456 0.94232 0.92860 0.91514 0.88900 0.9285 0.90595 0.88849 H1-HD 0.90573 088385 0.86261 0.82193 0.88797 0.86230 0.83748 079031 087056 0.84127 0.81309 0.75992 0.8549 0.82075 0.78941 0.73069 083675 0.80073 0.76642 0.70259 082035 0.78120 0.74409 0.67556 0.80426 0.76214 0.72242 0.64958 0.78849 0.74356 0.70138 0.62450 0.77303 0.72542 0.68095 0.60057 0.75788 0.70773 0,66112 0.57748 0.74301 0.69047 0,64186 0.55525 0.72845 0,67362 0.62317 0.53391 0.71416 0.65720 0,60502 051337 0.70016 0.64117 0.58739 0.49363 0.68643 0.62553 0.57029 047464 0.67297 0.61027 0.55368 0.45639 0.65978 0.59589 0.53755 04388 0.64684 0.58086 0,52189 0,421 96 0.63416 0.56670 0,50669 040573 0.62172 0.55289 0.49193 0.39012 0.60953 0,53939 0,47761 0.37512 0.59 758 0.52623 0.46369 0.36069 0.58586 0.51340 0.45019 0,34682 0.57437 OTHISH 0.43708 0,33348 0.56311 0.48866 04235 0.32065 0.55207 047676 041199 0.30832 0.54125 0.46511 0,39999 0.296-46 0.53063 0.43 0.38834 0.28506 0.52023 0.44270 0.37703 0.27409 0.51003 0.43191 0,36604 0.26355 0.50003 0.42137 0.35538 0.25342 0.49022 0.41109 0.34503 0.24367 0.48061 0.40107 0.3398 0.2M 0.47119 0.39129 0.32523 0.22529 0.46195 0.38174 0.31575 0.21662 0.45289 0.37243 0.30656 020829 0.41020 0.32917 0.26444 0.17120 0.37153 0.29094 0.22811 0,14071 6% 99 109 11% 124 14% 155 0.9524 141 440 0.93458 0.92593 0.91743 0.90909 6.90090 0.89286 087719 086957 0.90703 0.89000 0.87314 05A 0.84158 0.82645 0.81162 0.79719 0.76947 0.75614 0.86384 0.83962 0.81630 0.79383 0.77218 0.75131 0.73119 0.71178 0.67497 0.65752 0.87270 0.79209 0.76290 0.73503 0.70843 0.68301 0.65873 0.63552 057175 0 7805 0.74726 0.71 299 0.58058 0.64993 0.62092 0.59345 0.56743 051937 049718 0.74622 0.70496 0.56634 0.63017 0.59627 0.56447 0.53464 0.50663 0.45559 041223 0 71058 0.66505 0.62275 0.58319 0.54703 051316 0.48166 045735 0.39954 0.37594 0.67681 0.62741 0.58201 0.54027 0.50187 046651 043395 0.4038 0.35056 032690 0.64451 0.59190 0.54393 0.50025 0.46043 0.42410 0.39032 6.36061 030751 0.28425 0.61391 0.55839 0.50835 0.46319 0.42241 0.38554 0.35218 0.32197 0.26974 0.24718 0.58468 0.52679 0.47509 0.42 0.38753 0.35049 0.31728 0.28748 0.23562 0.21494 0.55684 0.49697 0.44401 0.39711 0.35553 0.31863 0.28584 0.25668 0.20756 18691 0.53032 0.46894 0.41496 0.36770 0.32518 0.28966 0.25751 0.22917 0.18207 016253 0.50507 0.44230 0,9782 0.44046 0.29925 0.26333 0.28199 0.20462 0.15971 0.14133 0.48102 0.41727 0.36245 0.31524 0.27454 0.23939 0.20900 0.18270 0.14010 012289 0.45811 0.39365 0.33873 0.29189 0.25187 0.21763 0.18829 0.15312012289 0.10685 043630 0.37136 0,31657 0.27027 0.23107 0.19784 0.16963 0.14564 0.10780 0.09293 0.41552 0.35034 0.29585 0.25025 0.21199 0.17986 0.15282 0.13004 0.09456 10 ) 13% 0.33051 0.27651 0.23171 0.1949 0.16351 0.13768 0.11611 0.08295 0.07027 3FB 0.31180 0.25842 0.21455 0.17813 014861 0.12403 0.10367 0.07276 0.06110 0.35894 0.29416 0.24151 0.19865 0.16370 0.13513 0.11174 0,09255 0.003 0.05313 0.34185 027751 0.22571 0.18394 0.15018 0.12285 0.10067 0.68264 0.05599 0.0.6620 0.32557 0.26180 0.21095 0.17032 0.13778 0.11168 0.09069 0.07379 0.04911 0.04017 0.31007 0.24698 0.19715 0.15770 0.12540 0.10153 0.08170 0.0668 0.04308 00M93 0.29530 0.233000.18425 0.14602 0.11597 0.09230 0.07351 0.05882 0.03779 0.03038 0.28124 0.21981 0.17220 0.13520 0.10539 0.08391 0.05531 0.05252 0.03315 0.02542 026785 0.20737 0.16093 0.12519 0.09761 0.07628 0.05974 0.0489 0.02908 0.02297 0.25509 0.19563 0.15040 0.11591 0.08955 0.06934 0.05382 0.04187 002551 0.01997 0.24295 0.18456 0.14056 0.10733 0.08215 0.06304 0.04849 0.03738 0.02237 0.01737 023138 0.17411 0.13137 0.098 0.07537 0.05731 0.04368 0.03338 0.01963 001510 0.22036 016425 0.12277 0.09202 0.06915 0.05210 0.03935 0.02980 0.01722001313 020987 0.15496 0.11474 0.08520 0.06344 0.04736 0.03545 0.02661 0.01510 0.01142 0.19987 014619 0.10723 0.07889 0.05820 0.04306 0.03194 0.02376 0.01325 0.00933 019035 0.13791 0.10022 0.07305 0.05339 0.01914 0.02878 0.02121 001162 0.00854 0.18129 0.13011 0.09366 0.06763 0.04899 0.03558 0.02592 0.01894 0.01019 0.00751 017266 0.12274 0.08754 0.06262 0.04494 0.03235 0.02335 0.01691 0.00894 0.00653 016444 0.11579 0.08181 0.05799 0.04123 0.02941 0.02104 0.01510 0.00784 0.00568 0.15661 0.10924 0.07546 0.06369 0.03783 0.02673 0.01896 0.0148 , 0.00494 0.14915 0.10205 0.07146 0.04971 0.03470 0.02430 0.01 708 0.01204 0.00604 0.00429 0 14205 0,09722 0.06678 0.04603 0.03184 0.02209 0.01538 0.01075 0.00529 0.00373 011130 0.07265 0.04761 0.03133 0.02069 0.01372 0.00913 0.00510 0.00275 0.00185 0.08720 0,05429 0.03395 0.02132 0.01345 0.00852 0.00542 0.00346 0.00143 0.00092 26 27 28 29 30 25 36 37 29 39 40 50 TABLE 1-3: Present value of an annuity due of payments of 1: (P/AD, 1, ) P/AD = (1 + 1" 1 n 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 25% 39 5% 6% 7% 9% 10% 11% 12% 14% 15% 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 100000 1.00000 1.98039 1.97561 1.97087 1.96154 1.95238 1.94340 1.93458 1.92593 1.91743 1.90909 1.90090 1.89286 187719 186957 2.94156 2.92742 291347 288609 285941 283339 2.80802 2.78326 2.75911 273554 2.71252 2.69005 264666 2.62571 3.88388 385602 3.82861 3.77509 3.72325 3.67301 3.62432 3.57710 353129 3.48685 3.44371 3.40183 3.32163 3.28323 480773 4.76197 471710 4.62990 4.54595 4 46511 438721 4.31213 4.23972 4. 15987 4.10245 4.03735 3.91371 385498 5.71346 5.64583 5.57971 5.45182 5.32948 321236 510020 4.99271 488965 4.79079 4.69990 4.60478 4.43308 4.35216 6.60143 6.50813 6.41719 6.24214 6.07569 5.91732 5.76654 5.62288 5.48992 5.35526 5.23054 5.11141 4.88867 4.78148 747199 7.349.39 7.23029 7.00205 6.78637 6.58238 6.38929 6.20637 6.03295 5.86842 5.71220 5,56376 5.28830 5.16042 8.32548 8.17014 & 01959 7.73274 7.46321 7.20979 6.97130 6.74664 6.53482 6,33493 6.14612 5.96764 5.63885 5.48732 9.16224 8.97087 & 78611 8.43533 8.10782 7.80169 7.51523 7.24689 6.99525 6.75902 6.53705 6,32825 5.94637 5.77158 9.98259 9.75206 9.53020 9.11090 8.72173 836009 8.02358 7.71008 741766 7.14457 688923 6.65022 6.21512 5,01877 10.78685 10,51421 10.25262 9.76018 9.30641 8.89687 8.49867 8.13896 780519 7.49506 7.20652 6.93770 6.45273 6.23371 11.57534 11.25776 10.99400 10.38507 9.86325 9.38384 8.94269 8.53608 8.16073 7.81369 7.49236 7.19437 6.66029 6.42062 12 31837 11.98318 11.63496 10,98565 10.39357 9.85268 9.35765 8.90378 8.48690 & 10336 7.74987 742356 684236 6.58315 13.10623 12.69091 12.29607 11.56312 10.89864 10.29498 9.74547 9.24424 8.78515 8.36669 7.98187 7,62817 7.00207 6.72448 1381926 13,38138 12.93794 12 118.39 11.37966 10.71225 10.10791 9.5 9.06069 8.60608 8.19087 781086 7.14217 5.84737 14.57771 14.05500 13.56110 12 65230 11.83777 11.10590 10.44665 9.85137 9.31256 8.82371 8.37916 7.97399 7.26506 6.95423 15.29187 14.71220 14.16612 13.16567 12.27407 1147726 10.76322 10.12164 9.54363 9.02155 8.54879 811963 7.37286 7.04716 15 99203 15.35336 14.75051 13.659-30 12689591182760 11.05909 10.37189 9.75663 9.20141 8.70162 8.24967 746742 7.12797 16.67846 15,97889 15.32380 14 13394 1308532 12.15812 11 33660 10.60360 9.95011 9.36492 883929 8.36578 7.55037 7.19823 17.35143 16.58916 15.87747 14.59033 13.46221 1246992 11.59401 10,81815 10.12855 9.51356 8.96333 8.46944 7.62313 7.29933 18.01121 17.18455 16 41502 15.02916 1382315 12.76408 11 8.3853 11.01680 10.29224 9.64869 9.07507 8.56200 7.68596 7.31246 18.65805 17.76541 16.93692 15,45112 14.16300 13.04158 12.06121 11.20074 1044243 9.77154 9.17574 8.64465 7.74294 7.35866 19.29220 18.33211 17.44361 15.86684 14.48857 13.30338 12.27219 11.37106 10.58021 9.88322 926543 8.71843 7.792067.39884 19.91393 18.88499 17.93654 16.24696 14.79864 13.55036 12.46933 11.52876 10.70661 9.98474 9.34814 8.78132 783514 743377 20.52346 1942438 1841315 16.62208 15.09394 13.78336 12.65358 11.67478 1082258 10,07704 942174 8.84314 787293 745415 21.12104 19.95061 18.87684 16.98277 15.37519 14.00317 1282578 11.80998 10.92897 10.16095 948806 8.8966 7.90508 749056 21.70690 20.46401 19.32703 17.32999 1561303 14.21053 12.98671 11.93516 11.02658 10.23722 9.54780 8.94255 7.93515 7.51353 22.28127 20 96489 19.76411 17.66306 15.89813 14 40616 13.13711 12 05 08 11.11613 10.30657 9.60162 8.98442 7.95066 7.53351 2284438 21.45355 20.18845 17.98371 16.14107 14.59072 13.27767 12 15841 11.19828 10.36961 9.65011 9.02181 798304 7.55088 23.39646 21.93029 20,60044 18.29203 16.37245 14.76483 13.40904 12.25778 11 27365 10.42691 9.69379 9.05618 800266 7.56598 23.93770 22.39541 21.00043 18.58849 16.59281 14.92909 13.53181 1234980 11.34280 10.47901 9.73315 9.08499 801988 7.57911 24.46833 2284918 21.38877 18.87396 16.80268 15.08404 13.64656 12.43500 11.40624 10.52638 9.76860 9.11159 8.03498 7.59053 24.98856 23.29188 21.76579 19.14765 17.00255 15.23023 13.75379 12.51389 1146444 10.56943 980054 9.135.35 80483 7.60046 25.49859 23.72379 22.13184 19.41120 17. 19290 15.36814 13.89401 12.58693 11 51784 10.60857 9.82932 9.15656 805985 7.60910 25.99862 24.14516 22.48722 19.66461 17.37419 15.49825 13.94767 1265457 11 56682 10.64416 9.85524 9.17550 807005 7.61661 26.48884 24.56625 2283225 19.90828 17.54685 15.62099 14.03521 12.71719 11.61176 10.67651 9.87859 9. 19241 8,07899 7.62314 26.96945 24,95732 23.16724 20.14258 17.71129 15.73678 14.11702 12.77518 11.65299 10.70692 9.89963 920751 8.68683 7.62881 2744064 25.34860 23.49245 20.36786 17.86789 15.84602 14.19347 12.82887 11.69082 10.73265 9.91859 9.22099 8.09371 7.63375 27.90299 25.73034 23,80822 20.58448 18.01704 15.94907 14.26493 12.87858 11.72952 10.75696993567 9.23303 8.09975 763806 30.07996 27.50385 25,25427 21.54884 1866277 16 38318 14.55791 13.07707 11.86051 10.84909 9.99878 927642 8.12047 7.65244 32.05208 29.07137 26.50166 22.34147 19. 16872 16.70757 14.76680 13.21216 11.94823 10.90630 10.03624 930104 8.13123 7.65959 25 27 28 29 30 31 32 33 34 35 36 37 38 39 40 50