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Manning Imports is contemplating an agreement to lease equipment to a customer for five years. Manning normally sells the asset for a cash price of $100,000. Assume that 8% is a reasonable rate of interest. What must be the amount of quarterly lease payments (beginning at the inception of the lease) in order for Manning to recover its normal selling price as well as be compensated for financing the asset over the lease term?

Sagot :

Anthougoidn

Answer:

Manning Imports

The amount of the quarterly lease payments (beginning at the inception of the lease) in order for Manning to recover its normal selling price as well as be compensated for financing the asset over the lease term should be:

Payment Every Quarter = $5,266.65

Explanation:

a) Data and Calculations:

Cash price of equipment = $100,000

Reasonable rate of interest = 8%

Lease period = 5 years

Payment period = 20

From an online financial calculator:

Payment Every Quarter   $5,266.65

Total of 20 Payments   $105,332.90

Total Interest   $5,332.90

Lease Amortization Schedule with quarterly payment of $5,266.65:

 Beginning Balance Interest Principal Ending Balance

1 $100,000.00 $500.00 $4,766.65 $95,233.35

2 $95,233.35 $476.17 $4,790.48 $90,442.88

3 $90,442.88 $452.21 $4,814.43 $85,628.45

4 $85,628.45 $428.14 $4,838.50 $80,789.94

Year #1 End

5 $80,789.94 $403.95 $4,862.70 $75,927.25

6 $75,927.25 $379.64 $4,887.01 $71,040.24

7 $71,040.24 $355.20 $4,911.44         $66,128.79

8 $66,128.79 $330.64 $4,936.00 $61,192.79

Year #2 End

9 $61,192.79 $305.96 $4,960.68 $56,232.11

10 $56,232.11 $281.16 $4,985.48 $51,246.63

11 $51,246.63 $256.23 $5,010.41 $46,236.21

12 $46,236.21 $231.18 $5,035.46 $41,200.75

Year #3 End

13 $41,200.75 $206.00 $5,060.64 $36,140.11

14 $36,140.11 $180.70 $5,085.94 $31,054.16

15 $31,054.16 $155.27 $5,111.37         $25,942.79

16 $25,942.79 $129.71 $5,136.93 $20,805.86

Year #4 End

17 $20,805.86 $104.03 $5,162.62 $15,643.24

18 $15,643.24 $78.22 $5,188.43 $10,454.81

19 $10,454.81 $52.27 $5,214.37 $5,240.44

20 $5,240.44 $26.20 $5,240.44 -$0.00

Year #5 End

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