Question

Riverbed Leasing Company purchased specialized equipment from Wayne Company on December 31, 2019 for $510,000. On the same date, it leased this equipment to Sears Company for 5 years, the useful life of the equipment. The lease payments begin January 1, 2020 and are made every 6 months until July 1, 2024. Riverbed Leasing wants to earn 10% annually on its investment.

Various Factors at 10%
Periods or Rents		Future Value of $1		Present Value of $1		Future Value of an Ordinary Annuity		Present Value of an Ordinary Annuity
9		2.35795		0.42410		13.57948		5.75902
10		2.59374		0.38554		15.93742		6.14457
11		2.85312		0.35049		18.53117		6.49506

Various Factors at 5%
Periods or Rents		Future Value of $1		Present Value of $1		Future Value of an Ordinary Annuity		Present Value of an Ordinary Annuity
9		1.55133		0.64461		11.02656		7.10782
10		1.62889		0.61391		12.57789		7.72173
11		1.71034		0.58468		14.20679		8.30641

Calculate the amount of each rent. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.)

How much interest revenue will Riverbed earn in 2020? (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.)

Answer 1

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