The Deluxe Corporation has just signed a 168-month lease on an asset with a 19-year life. The
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The Deluxe Corporation has just signed a 168-month lease on an asset with a 19-year life. The minimum lease payments are $1,300 per month ($15,600 per year) and are to be discounted back to the present at a 9 percent annual discount rate. The estimated fair value of the property is $165,000.
a. Calculate the lease period as a percentage to the estimated life of the leased property.
b. Calculate the present value of lease payments as a percentage to the fair value of the property.
c. Should the lease be recorded as a capital lease or an operating lease. (Use criteria 3 and 4 for a capital lease.)
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
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Related Book For 
Foundations of Financial Management
ISBN: 978-1259194078
15th edition
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen
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