Communication S.A. signed a contract with Satellite Leasing Corporation at 1st January 2019 to lease a machine. The agreement consists in nine equal annual payments of $18,000 at the beginning of each year with an interest rate of 5%. The yearly rental payment includes $3,000 of executory costs related to taxes on the machine. There is an option to purchase the machine at the end of the lease term for $5,000. The machine has an estimated useful life of 10 years, no residual value and uses straight line depreciation method. Consider a PVIF (n=9, i=5%) of 0.6446 and PVIFA (n=9, i=5%) of 7.1078. The accounting balance day for Communication S.A. is 31 of December. Required a) Calculate the present value of the minimum lease payment
Communication S.A. signed a contract with Satellite Leasing Corporation at 1st January 2019 to lease a machine. The agreement consists in nine equal annual payments of $18,000 at the beginning of each year with an interest rate of 5%. The yearly rental payment includes $3,000 of executory costs related to taxes on the machine. There is an option to purchase the machine at the end of the lease term for $5,000. The machine has an estimated useful life of 10 years, no residual value and uses
Required a) Calculate the present value of the minimum lease payment
Step by step
Solved in 2 steps with 1 images