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Calculate the periodic lease payment

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Question - Ping Ltd. needs another bus to satisfy the increasing demand from its customers. However, the firm does not have enough capital to buy another bus. Travel Inc., a bus manufacture, agrees to lease a bus to Ping Ltd. On January 1st, 2018, Ping Ltd. leased a bus from Travel Inc. Answer all the following questions. Note you should treat each part of the following questions independently. (1) Suppose the lease is a finance lease and has the following lease terms.

Term of the lease: 3 years

Periodic lease payment will be paid in advance.

The fair value of the bus is 500,000.

The guaranteed residual value of the bus is 100,000. The expected residual value of the bus at the end of the lease term is 50,000.

The lessee will return the bus to the lessor at the end of the lease term.

Travel Inc.'s implicit interest rate is 10%.

Ping Ltd.'s incremental borrowing rate is 12%. According to the above lease term, calculate the periodic lease payment from the lessee to the lessor. Need to show the process.

Reference no: EM132960105

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