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Chapter 5: Q. 22BP-a (page 531)

The Hardaway Corporation plans to lease a $740,000 asset to the O’Neil Corporation. The lease will be for 11 years.

a. If the Hardaway Corporation desires a 13 percent return on its investment, how much should the lease payments be?

Short Answer

Expert verified

The lease payments will be $130,124.

Step by step solution

01

Information provided in question

Value of asset = 740,000

Lease period = 11 years

ROI = 13%

02

Calculation of lease payments

The lease payments will be $130,124

Lease payments=PV of lease paymentsPVAF(i=13%,n=11years)=$740,0005.6869=$130,124

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