A local car dealer is advertising a standard 24-month lease of $900 per month for its new XT 3000 series sports car. The standard lease requires a down payment of $3,700, plus a $800 refundableinitial deposit now. The first lease payment is due at the beginning of month 1. In addition, the company offers a 24-month lease plan that has a single up-front payment of $29,200, plus a refundableinitial deposit of $800. Under both options, the initial deposit will be refunded at the end of month 24. Assume an interest rate of 6% compounded monthly. With the present-worth criterion, whichoption is preferred?The present worth of the standard lease option is $(Round to the nearest dollar.)

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Answered: A local car dealer is advertising a…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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A local car dealer is advertising a standard 24-month lease of $1,150 per month for its new XT 3000 series sports car. The standard lease requires a down payment of $4,500 plus a $1,000 refundable initial deposit now. The first lease payment is due at the end of month 1. Alternatively, the dealer offers a 24-month lease plan that has a single up-front payment of $30,500 plus a refundable initial deposit of $1,000. Under both options, the initial deposit will be refunded at the end of month 24. Assume an interest rate of 6% compounded monthly. With the present-worth criterion, which option is preferred?
A local dealer is advertising a 24-month lease of a sport utility vehicle for $520 payable at the beginning of each month. The lease requires a $2,500 down payment plus a $500 refundable security deposit. As an alternative, the company offers a 24-month lease with a single up-front payment of $12,780 plus a $500 refundable security deposit. The security deposit will be refunded at the end of the 24-month lease. Assuming you have access to a deposit account that pays an interest rate of 6% compounded monthly, which lease is more favorable?
The toyota motor company is advertising a 24 month lease of 2014 camry for $189 payable at the beginning of each month. The lease requires $2,399 down payment plus first month payment. No security deposit is required. Lessee pays maintenance, excess wear and tear, and $0.18 per mile over 12,000 miles per year. Lease-end purchase option is $17,784 and lease payments total $4,536. A disposition fee of $350 is due at lease-end. Assuming an interest rate of 6% compounded monthly, what is the total cost of leasing if you put 40,000 miles at the end of lease?
Bravo Manufacturing Company is negotiating with a customer for the lease of a large machine manufactured by Bravo. The machine has a cash price of $800,000. Bravo wants to be reimbursed for financing the machine at an 8% annual interest rate. Required: Determine the required lease payment if the lease agreement calls for 10 equal annual payments beginning immediately. Determine the required lease payment if the first of 10 annual payments will be made one year from the date of the agreement. Determine the required lease payment if the first of 10 annual payments will be made immediately and Bravo will be able to sell the machine to another customer for $50,000 at the end of the 10-year lease.
To lease the car then purchase at the end of the five-year lease. The purchase price is $19,894. The sales tax rate is 15%. The interest rate for leasing the car is 7.49%. The monthly lease payment, including the sales tax, is $324.70. The residual value of the vehicle at the end of the lease term is $8,296.85. Initial amount due at signing: First monthly payment. Based on the information above, calculate the following; a).Initial payment due at signing. b). Total of all monthly payments. c). Residual cost at conclusion of lease. This is what you pay if you decide to purchase the vehicle, so it will include sales tax. d). Total cost if you lease then purchase at the end of the five-year lease.
a car can be purchased by paying $27000 now or can be leased by paying $725/month for the next four years with the first payment due on the day of signing the lease. What nominal rate of interest is charged on the lease
Benning Manufacturing Company is negotiating with a customer for the lease of a large machine manufactured by Benning. The machine has a cash price of $800,000. Benning wants to be reimbursed for financing the machine at a 12% annual interest rate over the five-year lease term. Required: 1. Determine the required lease payment if the lease agreement calls for 10 equal semiannual payments beginning six months from the date of the agreement. 2. Determine the required lease payment if the lease agreement calls for 20 equal quarterly payments beginning immediately. 3. Determine the required lease payment if the lease agreement calls for 60 equal monthly payments beginning one month from the date of the agreement. The present value of an ordinary annuity factor for n 5 60 and i 5 1% is 44.9550.
Benning Manufacturing Company is negotiating with a customer for the lease of a large machine manufactured by Benning. The machine has a cash price of $800,000. Benning wants to be reimbursed for financing the machine at an 8% annual interest rate. Required: 1. Determine the required lease payment if the lease agreement calls for 10 equal annual payments beginning immediately. 2. Determine the required lease payment if the first of 10 annual payments will be made one year from the date of the agreement. 3. Determine the required lease payment if the first of 10 annual payments will be made immediately and Benning will be able to sell the machine to another customer for $50,000 at the end of the 10-year lease.
On June 30, 2018, Georgia-Atlantic, Inc. leased a warehouse facility from IC Leasing Corporation. The leaseagreement calls for Georgia-Atlantic to make semiannual lease payments of $562,907 over a three-year leaseterm, payable each June 30 and December 31, with the first payment at June 30, 2018. Georgia-Atlantic’s incremental borrowing rate is 10%, the same rate IC uses to calculate lease payment amounts. Depreciation is recordedon a straight-line basis at the end of each fiscal year. The fair value of the warehouse is $3 million.Required:1. Determine the present value of the lease payments at June 30, 2018 (to the nearest $000) that GeorgiaAtlantic uses to record the right-of-use asset and lease liability.2. What amounts related to the lease would Georgia-Atlantic report in its balance sheet at December 31,2018 (ignore taxes)?3. What amounts related to the lease would Georgia-Atlantic report in its income statement for the year endedDecember 31, 2018 (ignore taxes)?
A car can be purchased by paying $27 000 now or can be leased by paying $725 per month for the next four years, with the first payment due on the day of signing lease. What nominal rate of interest is charged on the lease?
Universal Leasing leases electronic equipment to a variety of businesses. The company’s primary service is providing alternate financing by acquiring equipment and leasing it to customers under long-term sales-type leases. Universal earns interest under these arrangements at a 10% annual rate. The company leased an electronic typesetting machine it purchased for $30,900 to a local publisher, Desktop Inc., on December 31, 2020. The lease contract specified annual payments of $8,000 beginning January 1, 2021, the beginning of the lease, and each December 31 through 2022 (three-year lease term). The publisher had the option to purchase the machine on December 30, 2023, the end of the lease term, for $12,000 when it was expected to have a residual value of $16,000, a sufficient difference that exercise seems reasonably certain.Required:1. Show how Universal calculated the $8,000 annual lease payments for this sales-type lease.2. Prepare an amortization schedule that describes the pattern…
On June 1, 2021, Florida National leased a building. The lease agreement calls for Florida National to make lease payments of $3,618.18 each month for the next two years, with the first lease payment beginning June 30. The company’s normal borrowing rate is 8%.Required:1. Calculate the present value of the lease payments. Round to the nearest whole dollar. (Hint: Use a financial calculator or Excel)2. Record the lease on June 1, 2021.

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