January 1, 2018. P 6-11 Solving for unknown lease payment LO6-8, LO6-9 Benning M

Question

January 1, 2018. P 6-11 Solving for unknown lease payment LO6-8, LO6-9 Benning Manufacturing Company is negotiating with a customer for the lease of a large machine manufactured by Benning. The machine has a cash price of $800,000. Benning wants to be reimbursed for financing the machine at an 8% annual interest rate. Required: 1. Determine the required lease payment if the lease agreement calls for 10 equal annual payments beginning immediately 2. Determine the required lease payment if the first of 10 annual payments will be made one year from the date of the agreement. 3. Determine the required lease payment if the first of 10 annual payments will be made immediately and Benning will be able to sell the machine to another customer for $50,000 at the end of the 10-year lease. P 6-12 Solving for unknown lease payment; compounding periods of varying length Page 345 MacBook Air F10 F11 Fs F7 F8

Explanation / Answer

1) Solution: $110,392

Working: 800,000 / 7.24689 = 110,392

2) Solution: $119,224

Working: 800,000 / (P/A,8%,10) = 800,000 / 6.7101 = 119,224

3) Solution: $107,196

Working: 50,000 * (P/F, 8%,10) = 50,000 * 0.4632 = 23,160

(800,000 - 23,160) / 7.24689 = 107,196

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