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On December 1, year 1, Gold Star Leasing Company leases equipment to Brick Co. with 5 equal annual payments of $80,000 each, payable beginning December
On December 1, year 1, Gold Star Leasing Company leases equipment to Brick Co. with 5 equal annual payments of $80,000 each, payable beginning December 1, year 1. Brick Co. agrees to guarantee the $10,000 residual value of the asset at the end of the lease term. Bricks incremental borrowing rate is 10%, however it knows that Gold Stars implicit interest rate is 8%. Show supporting computations. Round to the nearest dollar. PV of Annuity Due PV of Ordinary Annuity PV of Single Sum 8%, 5 periods 4.31213 3.99271 0.68508 10%, 5 periods 4.16986 3.79079 0.62092 How much will Brick Co. capitalize (the initial value) for the leased equipment on December 1, year 1? SHOW YOUR WORK
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