Kit Company leased equipment at an annual rental of P45,000 payable in advance for five years. Under the lease contract, Kit is given the option to purchase the asset for P75,000 at the end of the lease term and Kit is reasonably certain to exercise this option. The appropriate interest rate is 12%. Present value of 1 at 12% for 5 periods is 0.5674. Present value of an annuity due of 1 at 12% for 5 periods is 4.0373. What is the capitalized cost of right of use equipment? a. 225,000 b. 300,000 c. 224,234 d. 189,679

Kit Company leased equipment at an annual rental of P45,000 payable in advance for five years. Under the lease contract, Kit is given the option to purchase the asset for P75,000 at the end of the lease term and Kit is reasonably certain to exercise this option. The appropriate interest rate is 12%. Present value of 1 at 12% for 5 periods is 0.5674. Present value of an annuity due of 1 at 12% for 5 periods is 4.0373. What is the capitalized cost of right of use equipment? a. 225,000 b. 300,000 c. 224,234 d. 189,679

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 1P

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