Cosmetics, Inc. has entered into a leasing agreement to rent equipment from Culver Leasing services. There is r title, there is not a bargain purchase option, and the economic life test is not met. Based on the following information, would be used in the 90% test for the present value of the lease payments for the lessee? Annual Payments (1st day of the period) $51300 Lease Term 5 years $12300 Guaranteed Residual Value Incremental Borrowing Rate (lessor implicit rate is not known) 6%.5 periods PV Annuity Due 4.46511 8% PV Ordinary Annuity 4.21236 PV Single Sum 0.74726
Q: Yields on short-term bonds tend to be more volatile than yields on long-term bonds. Suppose that you…
A: Loss on Portfolio= portfolio * modified duration * Change in basis point of 5 year bond / Change in…
Q: Turkeyen Inc. had opening receivables of $5,000. With the hire of a new credit controller their…
A: Accounts receivables refer to the outstanding amounts owed to a business by its customers or clients…
Q: Yields on short-term bonds tend to be more volatile than yields on long-term bonds. Suppose that you…
A: The issue you presented has to do with finance, more especially with regard to managing interest…
Q: A school fund establishes that the following deposits must be made: Year 1, $2,000; Year 2, $2,000 +…
A: To determine the scholarship payment can be in perpetuity, we need to find the present value of the…
Q: Day 0 1 2 3 Beginning Balance $0.00 Deposits Price $100.00 $99.40 $97.10 $101.10 Gain Ending Balance…
A: Ending Balance = Beginning Balance + Deposits (+/-) Gain/(loss)
Q: 39. Money Market Account An account invested in a money market fund grew from $67,081.20 to…
A: Future value is that amount which will be require to paid at some specified period of time. It…
Q: Use Table 10. Suppose the bank in Table 10 loses $2 in loans. Calculate the new risk weighted…
A: Risk weighted capital ratio = (Capital tier 1 + Capital tier 2) / risk weighted assets.
Q: You agree to make 36 deposits of $600 at the beginning of each month into a bank account. At the end…
A: An annuity is a series of fixed amount cash flows at equal time intervals for a specific duration.…
Q: You purchase a 6% $1,000 bond with a term of 5 years and reinvest all interest payments. If interest…
A: Bond valuation:Bond valuation is the process of determining the fair market price of a bond, which…
Q: Based on the CAPM, Jensen's Alpha of a firm a) equals zero if the firm's stock returns have…
A: Jensen’s Alpha is calculated by:Jensen’s Alpha=Ri−(Rf+β(Rm−Rf))where:Ri=realized return of the…
Q: Earsplitting Music Inc. has acquired 60% of Raucous Sound, while Deafening Systems Corp. has…
A: A Joint Venture is basically two or more companies join together and create a new entity for a…
Q: You have decided to refinance your mortgage. You plan to borrow whatever is outstanding on your…
A: MORTGAGEA mortgage is a legal agreement between a borrower and a lender, typically a bank, in which…
Q: You wanted to accumulate $20,000 in 5 years from now and you decided to deposit 5 deposits with same…
A: > Future value (FV) = $ 20000> Number of annual deposits (n) = 5> Real rate = 4%>…
Q: A lump-sum payment of $1,040,000 right now, in which case 45% will be deducted for taxes. We do not…
A: The current worth of the amount that can be invested further for certain period of time with given…
Q: True/False: Discounting the FCF(Free Cash Flow) of the 100% equity firm with the WACC (Weighted…
A: Explanation:WACC: It represents the blended cost of capital for an all-equity firm. Since it only…
Q: Lingenburger Cheese Corporation has 8.3 million shares of common stock outstanding, 305,000 shares…
A: WACC represents the average cost of capital of the corporation and is estimated by taking the sum of…
Q: A 13 -year loan for $1,500,000 is to be amortized by equal monthly payments. If the APR is at 7.53%,…
A: Loan amount = $ 1,500,000Number of years of loan = 13APR= 7.53%
Q: Magnum Headache, Inc., is unlevered, with equity valued at $7 million and with 3.5 million shares…
A: Unlevered and levered firm data UnleveredLeveredNumber of shares35000002500000Debt2000000Annual…
Q: Suppose the returns on an asset are normally distributed. The historical average annual return for…
A: Variables in the question:Average annual return for the asset=5.2%Standard deviation=10.6%
Q: You want to create a portfolio equally as risky as the market, and you have $500,000 to invest.…
A: The beta of a portfolio refers to the measure of the sensitivity of the portfolio return to the…
Q: 5. Use the calculator and Excel to answer the following: a. You want to become a millionaire…
A: The financial calculator can be used to find the the number of payments required to become…
Q: Principal (after down payment) $484,500.00 APR: fixed Discount Points Monthly Payment 5.0% No points…
A: Points are amount paid as a percentage of the loan amount and these are paid to reduce the interest…
Q: Which of the following types of businesses would be most attractive to a financial buyer for an LBO?
A: The most attractive business for a financial buyer for an LBO would be the slow growing distribution…
Q: You own a portfolio that has $1,550 invested in Stock A and $3,900 invested in Stock B. If the…
A: Expected Return on Portfolio = Expected Profit / Total Portfolio
Q: 1) Portfolio P has a standard deviation of 20%. (2) The required return on Portfolio P is equal to…
A: Standard deviation is the deviation from the means return and shows the risk related to over all…
Q: Acquiring Corporation is considering a takeover of Takeover Target Incorporated. Acquiring has 16…
A: Here,No. of Shares of Acquiring Company is 16 millionPrice per Share of Acquiring Company is $30No.…
Q: Swift Oil Company is considering investing in a new oil well. It is expected that the oil well will…
A: Annual Rate of Return:The annual rate of return from an investment is a measure used to evaluate the…
Q: What is the maturity value of a 3-year term deposit of $9914.05 at 3.6% compounded monthly? How much…
A: Future value is a financial concept that refers to the projected worth of an investment or asset at…
Q: Prestige Properties plans to raise $225,000 over a 10-year period so they can purchase a parcel of…
A: Compound = Semiannually = 2Future Value = fv = $225,000Time = t = 10 * 2 = 20Interest Rate = r = 8 /…
Q: Dan borrowed $994.00 today and is to repay the loan in two equal payments. The first payment is in…
A: Let the equal installments be X.PV= C/(1+r)^nWhere C= Cashflows = X,r= 7%/12Loan taken = 994
Q: Marcus deposits $2600 into an account that has an annual interest rate of 5% compounded monthly. If…
A: Deposit is 42,600Annual Interest Rate (r) is 5%Compounding Period (m) is Monthly i.e 12Time Period…
Q: a firm has 101 shareholders. 100 of the shareholders each own 1 share. the remaining shareholder is…
A: A buyout refers to the acquisition of a controlling interest or the entirety of a company or…
Q: Matterhorn Mountain Gear is evaluating two projects with the following cash flows: Project X Project…
A: With NPV, investors may represent varying degrees of risk by using different discount rates. This…
Q: What is the expected rate of return if the beta is 1.14 and the Rf is 4.2%, Rm is 12%
A: According to Capital asset pricing model ,k = Rf+[b*(Rm-Rf)]wherek= expected rate of returnRf= risk…
Q: You are given the following information for Lightning Power Company. Assume the company's tax rate…
A: The Weighted Average Cost of Capital (WACC) is the average cost of a company's capital. It takes…
Q: Two-period binomial tree. A stock has a price of $20, and a standard deviation of 26%. The…
A: a. The risk-neutral probability (p) of the stock price going up in a single step can be calculated…
Q: Consider the following $1,000 par value zero-coupon bonds: Bond A B C D E O 21.54% O 17.54% 10.96%…
A: Yield to maturity for year 2 is 6.90%.Yield to maturity for year 1 is 5.40%.
Q: Please answer the next question based on the closing July futures contract prices for EUR for three.…
A: Loss on 3/02 =Size of contract ( Price on 3/02-price on 3/01)Loss on 3/02=150000 x 2 x…
Q: which of the following could be required to file a gst return? a. Chan's clothing store (an…
A: GST stands for Goods and Services Tax. It is a value-added tax levied on the supply of goods and…
Q: A 25-year mortgage of $122,137.51 at 8.7% interest compounded monthly has a monthly payment of…
A: Amount of mortgage = $122,137.10Interest rate = 8.7%Period = 25 yearsWe can compute the required…
Q: Assume that you are a consultant to Morton Inc., and you have been provided with the following data:…
A: Current Dividend = d0 = $1.4Current Price of Stock = p0 = $36Growth Rate = g = 4.8%
Q: 4. Classify each of the following factors/cases based on whether they favor a low dividend policy or…
A: Dividend policy decisions are crucial for a firm and are influenced by various factors. The…
Q: The coupon rate on an issue of debt is 9%. The yield to maturity on this issue is 12%. The corporate…
A: Here,Coupon rate is 9%Yield to maturity is 12%Tax rate is 33%
Q: Marshall Miller & Company is considering the purchase of a new machine for $50,000, instated. The…
A: An asset's projected or estimated worth at the end of its useful life, net of any taxes, is its…
Q: The Carter Corporation, a firm in the 25% marginal tax bracket, with a 15% required rate of return…
A: Net Present Value is calculated as the difference between the present value of cash inflow and cash…
Q: If the current yield of a bond goes down from 6.1% to 4.5%, by what percent does the market price…
A: Yield of a bond decrease factor = 4.5/6.1=0.737704918
Q: Sonia borrowed $7829.00 compounded monthly to help finance her education. She contracted to repay…
A: It can be calculated using=NPER(rate,pmt,pv,[fv],[type])Rate The interest rate for the loan.Nper…
Q: You are thinking of buying a stock priced at $109.31 per share. Assume that the risk-free rate is…
A: Current price = $109.31 per shareRisk free rate = 4.03% or 0.0403Market risk premium = 6.48% or…
Q: Problem 1 You are considering purchasing a share of Belgravia Petroleum Inc. The company just…
A: Current year Earnings per share$2.50Growth rate for next 4 years10.00%growth rate after 4…
Q: For the year ended December 31, 20X1, the amount of other comprehensive income reported on the…
A: A forward hedge is a risk management strategy used by businesses to protect against fluctuations in…
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 2 images
- On January 01, 2012, PC Options sold equipment to PC Madness and simultaneously leased it back. Pertinent information at this date are presented below. In the initial entry upon leaseback, how much is the gain to be recognized by the buyer-lessor? * Sales price P 9,000,000 Fair value 8,000,000 Carrying amount 7,200,000 Annual rental payable at the end of each year 600,000 Remaining life 20 Lease term 4 Interest rate on the lease contract 12% Borrowing rate of PC Options 11% Borrowing rate of PC Madness 10.50% a. P800,000 O b. P720,000 O c. P400,000 O d. P717,780Scape Corp. manufactures hi-tech equipment. Scape leased equipment to User, Inc., on January 1, 2019. Scape manufactured the equipment at a cost of $3,700,000. Lease description: Annual rental payments $1,000,000 at beginning of each period Lease term 5 years No Bargain Purchase – Or special use at the end Implicit interest rate and lessee’s incremental borrowing rate 12% Fair value of asset Expected Life of the Asset (SL depreciation with no salvage value) $6,000,000 6 years Prepare appropriate entries for both User and Scape from the inception of the lease through the end of the first fiscal year (December 31).Eastern Edison Company leased equipment from Low-Tech Leasing on January 1, 2018. Low-Tech recently purchased the equipment at a cost of $334.936. Other information: 5 years $79,000 on January 1 each year 5 years Lease term Annual payments Life of asset Fair value of asset $334,936 Implicit interest rate 9% Incremental rate 9% There is no expected residual value. Required: Prepare appropriate journal entries for Low-Tech Leasing for 2018. Assume a December 31 year-end. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your answers to the nearest whole dollar amounts.) View transaction list Journal entry worksheet 1 2 3 > Record the entry at the inception of the lease. Note: Enter debits before credits. Date General Journal Debit Credit January 01, 2018
- Eastern Edison Company leased equipment from Low-Tech Leasing on January 1, 2018. Low-Tech recently purchased the equipment at a cost of $247,570. Other information: Lease term Annual payments Life of asset 4 years $71,000 on January 1 each year Incremental rate 4 years Fair value of asset Implicit interest rate 10% $247,570 10% There is no expected residual value. Required: Prepare appropriate journal entries for Low-Tech Leasing for 2018. Assume a December 31 year-end. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your answers to the nearest whole dollar amounts.)On January 1, 2024, Majestic Mantles leased a lathe from Equipment Leasing under a finance lease. Lease payments are made annually. Title does not transfer to the lessee and there is no purchase option or guarantee of a residual value by Majestic. Portions of the Equipment Leasing's lease amortization schedule appear below: January 1 Payments $ 22,000 $ 22,000 $ 22,000 $ 22,000 $ 22,000 $ 22,000 $ 22,000 2024 2025 2026 2027 2028 2029 2030 2041 2042 2043 $ 22,000 $ 22,000 $ 22,000 Effective Interest $ 18,403 $ 18,043 $ 17,647 $ 17,212 1. Lease liability 2. Right-of-use asset 3. Lease term $ 16,733 $ 16,207 $ 5,471 $ 3,818 $ 2,000 Decrease in Balance $ 22,000 $ 3,597 $ 3,957 $ 4,353 $ 4,788 $ 5,267 $ 5,793 4. Effective annual interest rate 5. Total of lease payments 6. Total effective interest expense $ 16,529 $ 18,182 $ 20,000 Outstanding Balance $ 206,028 $ 184,028 $ 180,431 $ 176,474 $ 172, 121 $ 167,333 $ 162,067 $ 156,273 Required: 1. What is Majestic's lease liability at the…On January 1, 2021, Majestic Mantles leased a lathe from Equipment Leasing under a finance lease. Lease payments are made annually. Title does not transfer to the lessee and there is no purchase option or guarantee of a residual value by Majestic. Portions of the Equipment Leasing's lease amortization schedule appear below: Effective Decrease in Outstanding Jan. 1 Payments Interest Balance Balance 236,474 2021 26,000 26,000 210,474 2022 26,000 22,100 3,900 206,574 2023 26,000 21,690 4,310 202,264 2024…
- At the beginning of the current year, a company leased computer equipment to another company under a direct financing lease.The equipment has no residual value at the end of the lease and the lease does not contain bargain purchase option.The entity wishes to earn 8% interest on a 5-year lease of equipment with a cost of P3,234,000. The present value of an annuity due of 1 at 8% for 5 years is 4.312.What is the interest revenue for the current year?On January 1, 2024, National Insulation Corporation (NIC) leased equipment from United Leasing under a finance lease. Lease payments are made annually. Title does not transfer to the lessee and there is no purchase option or guarantee of a residual value by NIC. Portions of the United Leasing’s lease amortization schedule appear below: January 1 Payments Effective Interest Decrease in Balance Outstanding Balance 2024 $ 244,813 2024 $ 27,000 $ 27,000 $ 217,813 2025 $ 27,000 $ 23,959 $ 3,041 $ 214,772 2026 $ 27,000 $ 23,625 $ 3,375 $ 211,397 2027 $ 27,000 $ 23,254 $ 3,746 $ 207,651 2028 $ 27,000 $ 22,842 $ 4,158 $ 203,493 2029 $ 27,000 $ 22,384 $ 4,616 $ 198,877 — — — — — — — — — — — — — — — 2041 $ 27,000 $ 10,852 $ 16,148 $ 82,505 2042 $ 27,000 $ 9,076 $ 17,924 $ 64,581 2043 $ 27,000 $ 7,104 $ 19,896 $ 44,685 2044 $ 49,600 $ 4,915 $ 44,685 $ 0 What is the asset’s residual value expected at the end of the lease term? What is the effective…Eastern Edison Company leased equipment from Low-Tech Leasing on January 1, 2018. Low-Tech recently purchased the equipment at a cost of $366,951. Other information: 5 years $88,000 on January 1 each year 5 years Lease term Annual payments Life of asset Fair value of asset $366,951 Implicit interest rate 10% Incrementa1 rate 10% There is no expected residual value. Required: Prepare appropriate journal entries for Low-Tech Leasing for 2018. Assume a December 31 year-end. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your answers to the nearest whole dollar amounts.) View transaction list Journal entry worksheet 1 2 3 Record the entry at the inception of the lease. Note: Enter debits before credits. Date General Journal Debit Credit January 01, 2018
- On January 1, 2024, National Insulation Corporation (NIC) leased equipment from United Leasing under a finance lease. Lease payments are made annually. Title does not transfer to the lessee and there is no purchase option or guarantee of a residual value by NIC. Portions of the United Leasing’s lease amortization schedule appear below: January 1 Payments Effective Interest Decrease in Balance Outstanding Balance 2024 $ 244,813 2024 $ 27,000 $ 27,000 $ 217,813 2025 $ 27,000 $ 23,959 $ 3,041 $ 214,772 2026 $ 27,000 $ 23,625 $ 3,375 $ 211,397 2027 $ 27,000 $ 23,254 $ 3,746 $ 207,651 2028 $ 27,000 $ 22,842 $ 4,158 $ 203,493 2029 $ 27,000 $ 22,384 $ 4,616 $ 198,877 — — — — — — — — — — — — — — — 2041 $ 27,000 $ 10,852 $ 16,148 $ 82,505 2042 $ 27,000 $ 9,076 $ 17,924 $ 64,581 2043 $ 27,000 $ 7,104 $ 19,896 $ 44,685 2044 $ 49,600 $ 4,915 $ 44,685 $ 0 What is the lease term in years? 20 years What is the asset’s residual value expected at the end…Crane corporation owns equipment that cost $65, 600 and has a useful lofe of 8 years with no dalvage value. On July 1, 2025 Crane leases the equipment to Cullumber INC for one rental psyment of $12, 300 on January 1. Assuming Cullimber (lessee) elects to use the short term lease exception, prepare Cullumbers 2025 joirnal entryHappy Company purchased a packing machine intended for leasing at a cost of P330,000. The machine was leased to Great Company on January 1, 2021, at an annual rental of P58,860 payable in advance over a period of 10 years. The lease qualifies as a direct financing lease. There is no expected residual value for the asset. Implicit interest rate is 16%. Happy Company uses the calendar year. What is the amount of interest revenue recognized in profit or loss by Happy Company for the years 2021 and 2022? A. P43,382 and P40,906 B. P52,800 and P51,830 C. P43,832 and P40,609 D. P52,800 and P51,380