1
100 Determine the total cost to the lessee of the following lease proposal on an office building, for the third year: 1 12 494000 5928000 1200
Monthly rent Energy Costs Repairs Building Insurance
8% of Revenue Paid by Lessee Paid by Lessor Paid by Lessee
The average monthly revenues over the ten-year lease period are expected to start at $494,000 and increase by $5,000 each year. The estimated monthly costs for energy are expected to be $100 in the first year and increase by $700 each year. The estimated annual costs for repairs are expected to be $6,000 in the first year and increase by $200 each year. The building insurance is expected to be $5,000 in the first year and increase by $500 each year. Express your answer in whole dollars, do not use dollar signs or commas in your answer.
Revenue Ex. Energy Student Response Answer: Score: 63624 Correct Answer Ins. 507,840 0/3.75
2 5000 5933000 1900
3 700 5938000 2600
200 0.08
474640 2600 6000
0.08 12 0.006666667
2
initial 9200 Fidencio Lopez, owner of Fido's Pizzaria, has just signed a lease contract for several major machines (ovens and so forth). The lease required an initial payment of $9,200 when the lease was signed and five future payments of $8,800 each at one-year intervals. The restaurant's incremental interest rate is 14%. Mr. Lopez's accountant has determined that the lease must be capitalized. What is the balance of the lease liability at the end of the first year? Express your answer in whole dollars, do not use dollar signs or commas. 8800 9200
Student Response Answer: 15480 0/3.75 Score:
Correct Answer 25,641
To find the amount of a capitalized lease, you add any initial payments to the lease liability, which is eq Dr. Patterson
2 18000
3 26800
4 35600
5 44400
6 53200
0.014 252 17748
375.2 26424.8
Payment Years Annual Rate Future Value
$
8,800 2 14% ($18,832.00) ($28,032.00) -9200
ease liability, which is equal to the present value of the lease payments plus the present value of any lease buyouts. Keep in mind: the inte
youts. Keep in mind: the interest rate and the number of payments have to correspond to the actual schedule of the lease payments (mon
edule of the lease payments (monthly: divide the annual rate by twelve, multiply the number of years times twelve; quarterly: divide the
mes twelve; quarterly: divide the annual rate by four, multiply the number of years times four).
3
Fidencio Lopez, owner of Fido's Pizzaria, has just signed a lease contract for several major machines (ovens and so forth). The lease required an initial payment of $12,400 when the lease was signed and five future payments of $12,700 each at one-year intervals. The restaurant's incremental interest rate is 10%. Mr. Lopez's accountant has determined that the lease must be capitalized. What is the total amount of the capitalized lease? Express your answer in whole dollars, do not use dollar signs or commas. 0 12400 12700 60,543
Student Response Answer: 37950 0/3.75 Score:
Correct Answer
Payment Years Annual Rate Future Value
1 25100
2 37800
3 50500
4 63200
5 75900
$
12,700 5 10% ($77,534.77) ($65,134.77) -12400
4
The Jerusalem Inn has just leased a new computer as of January 1, 4 2003. The terms of the contract allow the lessee to buy the 5 computer for $4,400 at the end of the lease five years hence. ABC 20 Computer's salesperson believes the computer would have a fair -1 market value of $13,100 at the end of the lease period. 90% 0.12 Other lease terms are as follows: 4 Estimated useful life of computer 8 years
25475.4 127377
7800
31200
156000
7800
1950
132279.2602 Incremental cost of debt 15 percent 15873.51122 Average cost of debt 12 percent -3.24 Quarterly lease payments are due at the beginning of each three-4.239719877 month period starting on April 1, 2003. 4.239719877 Quarterly payments inclusive of insurance $ 8,500 560827.0086 Quarterly insurance cost $ 700 Fair market value $ 12,400 The lessor's inplicit interest rate is 9% for this venture. 12400 11160
What is the value of the computer equipment that should be
549667.0086
capitalized?
65960.04104
538507.0086 549667.0086 132279.2602 127377 4902.260164 422290.0086
-116405.7489
1 4 0.09
Correct Answer Answer: 127,377