PV Annuity Due PV Ordinary Annuity PV Single Sum 4.38721 4.10020 0.71299 4.23972

Question

PV Annuity Due

PV Ordinary Annuity

PV Single Sum

4.38721

4.10020

0.71299

4.23972

3.88965

0.64993

Crane, Inc. manufactures machinery used in the mining industry. On January 2, 2018 it leased equipment with a cost of $470000 to Silver Point Co. The 5-year lease calls for a 20% down payment and equal annual payments at the end of each year. The equipment has an expected useful life of 5 years. If the selling price of the equipment is $770000, and the rate implicit in the lease is 7%, what are the equal annual payments?

PV Annuity Due

PV Ordinary Annuity

PV Single Sum

7%, 5 periods

4.38721

4.10020

0.71299

9%, 5 periods

4.23972

3.88965

0.64993

$158369 $187796 $150237 $140408

Explanation / Answer

Lease iability = 770000*80%= 616000 Equal annual payments = 616000/4.10020= 150237 Option 3 is correct

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