Question
Please complete the following problems in Excel. Please show ALL calculations to arrive at the answer. Bates Company has entered into two lease agreements. In
Please complete the following problems in Excel. Please show ALL calculations to arrive at the answer.
Bates Company has entered into two lease agreements. In each case the cash equivalent purchase price of the asset acquired is known and you wish to find the interest rate which is applicable to the lease payments. Calculate the interest rate for the lease payments
(a) Lease A Lease A covers office equipment which could be purchased for $126,168. Bates Company has, however, chosen to lease the equipment for $35,000 per year, payable at the end of each of the next 5 years.
(b) Lease B Lease B applies to a machine which can be purchased for $134,141. Bates Company has chosen to lease the machine for $28,000 per year on a 6-year lease. Payments are due at the start of each year.
Jill Morris is presently leasing a small business computer from Eller Office Equipment Company. The lease requires 10 annual payments of $5,000 at the end of each year and provides the lessor (Eller) with an 8% return on its investment. Assuming the computer has a ten-year life and will have no salvage value at the expiration of the lease, what was the original cost of the computer to Eller?
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