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Metlock Company leases an automobile with a fair value of $16,767 from John Simon Motors, Inc., on the following terms: 1. Non-cancelable term of 50
Metlock Company leases an automobile with a fair value of $16,767 from John Simon Motors, Inc., on the following terms:
1. | Non-cancelable term of 50 months. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2. | Rental of $350 per month (at the beginning of each month). (The present value at 0.5% per month is $15,528.) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
3. | Metlock guarantees a residual value of $1,170 (the present value at 0.5% per month is $912). Delaney expects the probable residual value to be $1,170 at the end of the lease term. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
4. | Estimated economic life of the automobile is 60 months. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
5. | Metlocks incremental borrowing rate is 6% a year (0.5% a month). Simons implicit rate is unknown.
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