For the following lease,determine the minimum lease payments for the lessee. $$\begin{array} { | l | l | }
\hline \text { Annual lease payment at the end of the end } & \$ 22,000 \
\hline \text { Lease term } & 5 \
\hline \text { Incremental rate } & 10 \% \
\hline \text { Implicit rate (unknown to lessee) } & 8 \% \
\hline \text { Unguaranteed residual value } & 15,000 \
\hline
\end{array}$$

Question

For the following lease,determine the minimum lease payments for the lessee. $$\begin{array} { | l | l | } 
\hline \text { Annual lease payment at the end of the end } & \$ 22,000 \
\hline \text { Lease term } & 5 \
\hline \text { Incremental rate } & 10 \% \
\hline \text { Implicit rate (unknown to lessee) } & 8 \% \
\hline \text { Unguaranteed residual value } & 15,000 \
\hline
\end{array}$$

Quizplus · Accepted Answer

The minimum lease payments for the lessee is $83,400. This is calculated as follows:Annual lease payment at the end of the end = $22,000Lease term = 5Incremental rate = 10 %Implicit rate (unknown to lessee) = 8 %Unguaranteed residual value = 15,000The present value of the minimum lease payments is:PV = $22,000 * (1 - (1 + 0.08)^-5) / 0.08 = $83,400

For the Following Lease,determine the Minimum Lease Payments for the Lessee