A construction company agreed to lease payments of $622.77 on construction equipment to be made at the end of every three months for 9.75 years. Financing is at 7% compounded quarterly. (a) What is the value of the original lease contract? (b) If, due to delays, the first 6 payments were deferred, how much money would be needed after 7 payments to bring the lease payments up to date? (c) How much money would be required to pay off the lease after 7 payments? (d) If the lease were paid off after 7 payments, what would the total interest be? (e) How much of the total interest would be due to deferring the first 6 payments?
A construction company agreed to lease payments of $622.77 on construction equipment to be made at the end of every three months for 9.75 years. Financing is at 7% compounded quarterly. (a) What is the value of the original lease contract? (b) If, due to delays, the first 6 payments were deferred, how much money would be needed after 7 payments to bring the lease payments up to date? (c) How much money would be required to pay off the lease after 7 payments? (d) If the lease were paid off after 7 payments, what would the total interest be? (e) How much of the total interest would be due to deferring the first 6 payments?
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 7MC: Using the information provided, what transaction represents the best application of the present...
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