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Mays Company has a machine with a cost of $750,000 which also is its fair value on the date the machine is leased to Par...

Mays Company has a machine with a cost of $750,000 which also is its fair value on the date the machine is leased to Park Company. The lease is for 6 years and the machine is estimated to have an unguaranteed residual value of $75,000. If the lessor’s interest rate implicit in the lease is 8%, the six beginning-of-the-year lease payments would be

Answer: (Time Value factors should include 5 decimal places like Chapter 6 tables.)

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Answer #1
Fair value of machine 750000
Less: Present value of unguaranteed residual value 47263 =75000*0.63017
Amount recovered through lease payments 702737
Divide by Present value of $1 annuity due 4.99271 =1+(1-(1.08)^-5)/0.08
Annual lease payments 140753
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