Ajax Capital has determined the amount to be amortized on an extruder is $540,000.If the required rate of return is 14%, what will be the total interest received over the life of the lease given that lease payments will be made at the beginning of each of the 7 years of the lease agreement? Assume a marginal tax rate of 40%.
A)$233,269
B)$748,786
C)$811,080
D)$110,467

Question

Quizplus · Accepted Answer

PMT = $540,000/[4.288(1.14)] = $110,467
Lease payment = $110,467/(1 - 0.40) = $184,112
Total interest = $184,112(7) - 540,000 = $748,786

Ajax Capital Has Determined the Amount to Be Amortized on an Extruder