Question

# Lease Master is prepared to lease you a truck for two years for a 15 percent...

Lease Master is prepared to lease you a truck for two years for a 15 percent return on its investments. The lease payments are to be made at the beginning of the year. The truck, which has a useful economic life of six years, cost \$60,000. Its estimated value in two years is \$17,000. The CCA rate is 30 percent, and Koss’s tax rate is 25 percent. Calculate the annual lease payment required by Koss Leasing round the final answer to the nearest whole dollar

We can use financial calculator for calculation of annual lease payment with below keystrokes.

The lease payments are to be made at the beginning of the year. so, your calculator should be in the beginning mode.

N = period of lease = 2; I/Y = required return = 15%; PV = cost of truck = \$60,000; FV = future value = \$17,000 > CPT = compute > PMT = annual lease payments = \$25,217

PV needs to be entered as negative value as it's a cash outflow.

the annual lease payment required by Koss Leasing is \$25,217.

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