Volt Electronics Company is considering leasing one of its products in addition to selling it outright to

Question:

Volt Electronics Company is considering leasing one of its products in addition to selling it outright to customers. The product, the Volt Tester, sells for $18,600 and has an economic life of eight years.
a. To earn 12 percent interest, what annual lease payment must Volt require as lessor? (Assume that lease payments are payable in advance.)
b. If the product has a (known with relative certainty) of $4,000 at the end of eight years, what annual lease payment will be required?
Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...