ORIE 350 Lecture 12

# ORIE 350 Lecture 12 - ORIE 350 Lecture 12 3 GMI industries...

This preview shows pages 1–2. Sign up to view the full content.

350,000 Leased assets(A) 950,000 ORIE 350 Lecture 12 3. GMI industries Leases a truck 4 year lease 4% interest at the end of each month, 499.77 2434.75 due at the lease signing i nom = 5.9 % Purchase option at the end of lease for 9,800 Lease checklist Ownership transfer: No Bargain purchase option: No Lease term > 75 of useful life: calculate PV of lease payments> 90% of fair value: calculate PV = 2434.75 + 499.77[1-(1+0.059/12) -47 / (0.059/12)] = 2434.75 + 20,927.03 = 23, 361.78 Price of truck today = PV of all payments + PV of purchase option PV of purchase option= FV/(1+i) n = 9800/ (1+0.059/12) 48 =7,744.33 Price = 23, 361.78+7,744.33= 31,106.11 Present value of lease payment / Price= 23, 361.78/31,106.11= 0.751<90%: NO Assume salvage value = 2,000 Annual depreciation = 31,106-9,800/4= 5,326.50 Useful life= 31,106-2,000/ 5,326.50= 5.46 years 4/5.46= 0.732: NO a. Operating lease b. Oct 31

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### Page1 / 4

ORIE 350 Lecture 12 - ORIE 350 Lecture 12 3 GMI industries...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online