Section 4 - Leases (Five questions for a total of 20 points) Refer to the following information in answering the five questions 1115 below. Clark, Morris \& Associates (CMA) are planning to buy a fleet of 100 Tesla Model X cars on lease beginning 1/1/2022. CMA is planning to monetize this fleet of electric vehicles as either on shortterm rentals basis or as limos in five largest cities in the US. Their targeted audience consists of young, smart, highly educated and socially and environmentally conscious individuals. The original equipment manufacturer, Tesla, itself is ready to offer these cars on lease to CMA. The current market value of each car is $100,000. Tesla is willing to give these cars on a five-year lease and demands a 6% return per annum on monthly lease payments by the lessee. (Hint: This implies that the lessor expects to earn an interest of 1/12th of 6% per month for 60 months.) To simplify the calculations, assume that the economic life of the car is only five years, so that the lessor would have to simply junk the car (with zero salvage value) at the end of the fifth year. Ignore all the tax effects. Refer to the data at the beginning of this section (#4) regarding CMA. If CMA were to be able to classify the above contract as a finance lease, what portion of the lease payments would be reflected in cash flow from financing for the first three months? Please provide your answer in positive amounts. Further, the following options are on a single-car basis and not for the entire fleet. A. $5,799.84 B. $1,478.46 C. $1,629.80 D. $1,259.97 E. $4,321,28 Section 5 - Bonds (Three questions for a total of 12 points) Section 4 - Leases (Five questions for a total of 20 points) Refer to the following information in answering the five questions 1115 below. Clark, Morris \& Associates (CMA) are planning to buy a fleet of 100 Tesla Model X cars on lease beginning 1/1/2022. CMA is planning to monetize this fleet of electric vehicles as either on shortterm rentals basis or as limos in five largest cities in the US. Their targeted audience consists of young, smart, highly educated and socially and environmentally conscious individuals. The original equipment manufacturer, Tesla, itself is ready to offer these cars on lease to CMA. The current market value of each car is $100,000. Tesla is willing to give these cars on a five-year lease and demands a 6% return per annum on monthly lease payments by the lessee. (Hint: This implies that the lessor expects to earn an interest of 1/12th of 6% per month for 60 months.) To simplify the calculations, assume that the economic life of the car is only five years, so that the lessor would have to simply junk the car (with zero salvage value) at the end of the fifth year. Ignore all the tax effects. Refer to the data at the beginning of this section (#4) regarding CMA. If CMA were to be able to classify the above contract as a finance lease, what portion of the lease payments would be reflected in cash flow from financing for the first three months? Please provide your answer in positive amounts. Further, the following options are on a single-car basis and not for the entire fleet. A. $5,799.84 B. $1,478.46 C. $1,629.80 D. $1,259.97 E. $4,321,28 Section 5 - Bonds (Three questions for a total of 12 points)
