Dake Limited has just leased two new pieces of manufacturing equipment.Machine #1 had a purchase price of $26,000; the annual lease payment is $6,500 at the end of each of the next five years.The machine is expected to have a useful life of six years.The machine will be returned to the manufacturer at the end of the 5-year lease.Machine #2 can be purchased for $18,000.The lease requires annual payments of
$3,000 at the end of the next three years.Dake has the option of purchasing the lease at the end of the lease term for its fair market value at that time.Machine # 2 is expected to have a useful life of 10 years.Dake's incremental borrowing rate is 8%.
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The Answer of Dake Limited has just leased two new pieces of manufacturing equipment.Machine #1 had a purchase price of $26,000; the annual lease payment is $6,500 at the end of each of the next five years.The machine is expected to have a useful life of six years.The machine will be returned to the manufacturer at the end of the 5-year lease.Machine #2 can be purchased for $18,000.The lease requires annual payments of
$3,000 at the end of the next three years.Dake has the option of purchasing the lease at the end of the lease term for its fair market value at that time.Machine # 2 is expected to have a useful life of 10 years.Dake's incremental borrowing rate is 8%.
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Dake Limited Has Just Leased Two New Pieces of Manufacturing