&quot;Homework Quiz&acirc;€”5-1

# &quot;Homework Quiz&acirc;€”5-1 - Name Solution...

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Name Section Solution Homework Quiz—5 1. ABC Company (the lessee ) entered into a 10-year capital lease with XYZ Products ( lessor ). Annual rental payments are \$50,000 with the first payment due at June 1, 2010. ABC’s incremental borrowing rate is 11% and ABC does not know the implicit interest rate set by the lessor (10%). At the end of the lease, XYZ will transfer legal title of the leased asset to ABC. The leased asset’s residual value is zero. The executory costs are \$3,000 per year, payable annually on June 1 beginning in 2010, and are for machine adjustment services provided by the lessor’s engineering staff. You have the following interest rate data: Present value ordinary annuity , n=10, i=10% is: 6.14457 Present Value ordinary annuity , n=10, i=11% is: 5.88923 Present value annuity due , n=10, i=10% is: 6.75902 Present value annuity due , n=10, i=11% is: 6.53705 1a . In the space below calculate the present value of ABC’s minimum lease payments at 6/1/10. Please put the present value in the box below.

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&quot;Homework Quiz&acirc;€”5-1 - Name Solution...

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