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Corp8 manufactures office copiers and printers. Its best seller is a machine that costs $5,000 to...

  1. Corp8 manufactures office copiers and printers. Its best seller is a machine that costs $5,000 to build and can be sold for $7,500. The company has made the machine available for commercial lease under a standard two-year agreement calling for beginning-of-the year payments reflecting the company’s desired rate of return of 8%. What is the amount of the rental payment the company requires?

  2. Corp9 manufactures office copiers and printers. Its best seller is a machine that costs $5,000 to build and can be sold for $7,500. The company has made the machine available for commercial lease under a standard two-year agreement calling for end-of-the year payments reflecting the company’s desired rate of return of 8%. What is the amount of the rental payment the company requires?

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Answer #1
The minimum lease payments are expressed as the present value of lease payments at the outset of a lease contract.
Calculation of Minimum Lease Payment
Year Discount Factor@8% Annual Lease Payment Present Value
0 1 3750 3750.00
1 0.926 3750 3472.22
Amount of Rental Paymnt 7222.22
Note:The term minimum lease payment refers to the lowest possible payments a lessee is obligated
to make in connection with an asset over the term of an agreement.  
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