Wildhorse Company manufactures a check-in kiosk with an estimated economic life of 10 years and leases it to Sheffield Chicken for a period of 9 years. The normal selling price of the equipment is $172,124, and its unguaranteed residual value at the end of the lease term is estimated to be $26,200. Sheffield will pay annual payments of $20,800 at the beginning of each year. Wildhorse incurred costs of $141,100 in manufacturing the equipment and $2,400 in sales commissions in closing the lease. Wildhorse has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 5%. Sheffield Chicken has ar incremental borrowing rate of 5%. The lessor's implicit rate is unknown to the lessee. Click here to view factor tables. (a) Discuss the nature of this lease in relation to the lessee. This is a sales-type lease Compute the amount of the initial lease liability. (Round present value factor calculations to 5 decimal places, eg. 1.25124 and the final answer to O decimal places eg. 58,971.) The amount of the initial lease liability Save for Later Last saved 4 hours ago. Attempts: 0 of 1 used Submit Answer Saved work will he auto-suhmitted on the due date Auto-
Wildhorse Company manufactures a check-in kiosk with an estimated economic life of 10 years and leases it to Sheffield Chicken for a period of 9 years. The normal selling price of the equipment is $172,124, and its unguaranteed residual value at the end of the lease term is estimated to be $26,200. Sheffield will pay annual payments of $20,800 at the beginning of each year. Wildhorse incurred costs of $141,100 in manufacturing the equipment and $2,400 in sales commissions in closing the lease. Wildhorse has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 5%. Sheffield Chicken has ar incremental borrowing rate of 5%. The lessor's implicit rate is unknown to the lessee. Click here to view factor tables. (a) Discuss the nature of this lease in relation to the lessee. This is a sales-type lease Compute the amount of the initial lease liability. (Round present value factor calculations to 5 decimal places, eg. 1.25124 and the final answer to O decimal places eg. 58,971.) The amount of the initial lease liability Save for Later Last saved 4 hours ago. Attempts: 0 of 1 used Submit Answer Saved work will he auto-suhmitted on the due date Auto-
Fundamentals Of Financial Management, Concise Edition (mindtap Course List)
10th Edition
ISBN:9781337902571
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Eugene F. Brigham, Joel F. Houston
Chapter12: Cash Flow Estimation And Risk Analysis
Section: Chapter Questions
Problem 10P: Dauten is offered a replacement machine which has a cost of 8,000, an estimated useful life of 6...
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Transcribed Image Text:Wildhorse Company manufactures a check-in kiosk with an estimated economic life of 10 years and leases it to Sheffield Chicken
for a period of 9 years. The normal selling price of the equipment is $172,124, and its unguaranteed residual value at the end of the
lease term is estimated to be $26,200. Sheffield will pay annual payments of $20,800 at the beginning of each year. Wildhorse
incurred costs of $141,100 in manufacturing the equipment and $2,400 in sales commissions in closing the lease. Wildhorse has
determined that the collectibility of the lease payments is probable and that the implicit interest rate is 5%. Sheffield Chicken has an
incremental borrowing rate of 5%. The lessor's implicit rate is unknown to the lessee.
Click here to view factor tables.
(a)
Discuss the nature of this lease in relation to the lessee.
This is a sales-type lease
Compute the amount of the initial lease liability. (Round present value factor calculations to 5 decimal places, eg. 1.25124 and the
final answer to 0 decimal places eg. 58,971.)
The amount of the initial lease liability
24
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