Armstrong inc. is negotiating an agreement to lease equipment to a lessee for 5 years. The...

 

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Armstrong inc. is negotiating an agreement to lease equipment to a lessee for 5 years. The fair value of the equipment is $195,000 and the lessor expects a rate of return of 6% on the lease contract. The lessee has an option to purchase the equipment at the end of the 5-year term at $32,500, which is 20% under the estimated fair value at that time. If the first annual payment is required at the commencement of the lease, what fixed lease payment should Armstrong Inc. charge in order to earn its expected rate of return on the contract? • Note: Enter the answer in dollars and cents, rounded to the nearest penny. Note: Do not use a negative sign with your answer. Lease payment $ x Armstrong inc. is negotiating an agreement to lease equipment to a lessee for 5 years. The fair value of the equipment is $195,000 and the lessor expects a rate of return of 6% on the lease contract. The lessee has an option to purchase the equipment at the end of the 5-year term at $32,500, which is 20% under the estimated fair value at that time. If the first annual payment is required at the commencement of the lease, what fixed lease payment should Armstrong Inc. charge in order to earn its expected rate of return on the contract? • Note: Enter the answer in dollars and cents, rounded to the nearest penny. Note: Do not use a negative sign with your answer. Lease payment $ x

Answer rating: 100% (QA)

To calculate the fixed lease payment we can use the present value of an annuity formula The form... View the full answer