An investor has the opportunity to buy a long-term sub-lease contract that calls for 20 semi-annualpayments of $18,000 each. Payments on the sub-lease are to be made at the beginning of each semi-annual period, commencing on the date that the leasehold interest is purchased. The investor desires aminimum yield of 6% per annum, compounded annually.7. What type of annuity is described by the above facts?(1) Ordinary simple annuity(2) General annuity due(3) Simple annuity due(4) Ordinary general annuity

Annuity due are the types of annuity where the payments are made at the beginning of the payment…

Answered: An investor has the opportunity to buy…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

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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Similar questions

Using the information provided, what transaction represents the best application of the present value of an annuity due of $1? A. Falcon Products leases an office building for 8 years with annual lease payments of $100,000 to be made at the beginning of each year. B. Compass, Inc., signs a note of $32,000, which requires the company to pay back the principal plus interest in four years. C. Bahwat Company plans to deposit a lump sum of $100.000 for the construction of a solar farm In 4 years. D. NYC Industries leases a car for 4 yearly annual lease payments of $12,000, where payments are made at the end of each year.
Owens Company leased equipment for 4 years at 50,000 a year with an option to renew the lease for 6 years at 2,000 per month or to purchase the equipment for 25,000 (a price considerably less than the expected fair value) after the initial lease term of 4 years. Why would this lease qualify as a finance lease?
Use the information in RE20-6. However, assume that there is no bargain purchase option and that Montevallo guarantees the 20,000 estimated residual value at the end of the 10-year lease. Montevallo estimates that it is probable that it will have to pay 15,000 cash due to the residual value guarantee. Calculate the present value of the lease payments. Round your answer to the nearest dollar.
Ajax Capital has determined that the amount to be amortized on a security system is $240,000. What annual lease payment must Ajax (lessor) require from the lessee if the required rate of return is 18%? Assume that the lease payments will be made at the beginning of each of the 5 years of the lease agreement and that the marginal tax rate is 30%.
A contract requires lease payments of $900 at the beginning of every month for 3 years. a. What is the present value of the contract if the lease rate is 5.75% compounded annually? Round to the nearest cent b. What is the present value of the contract if the lease rate is 5.75% compounded monthly? Round to the nearest cent
A new lease involves payments of $30,000 per year for 10 years. Payments are made at the end of each year with no residual value. The Interest rate is 12% compounded annually. how do you Compute the Present value of the minimum lease payments ?
A contract requires lease payments of $700 at the beginning of every month for 5 years. a. What is the present value of the contract if the lease rate is 3.25% compounded annually? Round to the nearest cent b. What is the present value of the contract if the lease rate is 3.25% compounded monthly?
Gold Insurance Company intends to offer a contract with a guaranteed annuity in units of$500, payable at the end of each year for 25 years. The company has a strong investmentrecord and can consistently earn 7 percent on its net investments after taxes. If thecompany intends to earn 1 percent on this contract, compute the estimated price that GoldInsurance should set at a 6 percent discount rate. Assume that it is an ordinary annuity,and the price will be equivalent to the present value.
A contract has been signed to lease a building at P200,000 per year with an annual increase of P1,500 for 8 years. Payments are to be made at the end of each year, starting one year from now. The prevailing interest rate is 7%. What is lump sum paid today would be equivalent to the 8-year lease-payment plan?
what is the present value of a 12-year lease agreement with the interest of 7.5% that requires annual payments of 4,250 per year with 1st payment due now?
What is the present value of a 12 year lease arrangement with an interest rate of 7.5% that requires annual payments of $4250 per year with the first payment being due now
Suppose a firm which wants to purchase a piece of machinery borrows $10,000 to be repaid inive equal payments at the end of each of the next 5 years, and the interest rate is 15%, calculatehe annual payments associated with the repayment of this debt. Please finish the table below.lease round to 2 decimal places.

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