The Hardaway Corporation plans to lease a $900,000 asset to the O%u2019Neil Corp

Question

The Hardaway Corporation plans to lease a $900,000 asset to the O%u2019Neil Corporation. The lease will be for 16 years. Use Appendix D.

If the Hardaway Corporation desires a 12 percent return on its investment, how much should the lease payments be? (Round "PV Factor" to 3 decimal places. Round your answer to the nearest dollar amount. Omit the "$" sign in your response.)

The Hardaway Corporation is able to take a 10 percent deduction from the purchase price of $900,000 and will pass the benefits along to the O%u2019Neil Corporation in the form of lower lease payments, (related to the Hardaway Corporation in the form of lower initial net cost), how much should the revised lease payments be? The Hardaway Corporation desires a 12 percent return on the 16-year lease. (Round "PV Factor" to 3 decimal places. Round your answer to the nearest dollar amount. Omit the "$" sign in your response.)

The Hardaway Corporation plans to lease a $900,000 asset to the O%u2019Neil Corporation. The lease will be for 16 years. Use Appendix D.

Explanation / Answer

Hi,

Please find the answers as follows;

Part A:

Value of Lease Payment = Value of Asset Leased/PVIFA(16,12%) = 900000/6.974 = 129051

Part B:

Value of Lease Payment = (900000 - .10*900000)/6.974 = 116146

Thanks.

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