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Determine the present value of minimum lease rental payment

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Fred Ltd acquired an item of equipment and enters into a non-cancellable lease agreement with Melbourne Equipment Ltd on the 1st January, 2015. The lease consists of the following information:

  1. Date of inception: 1/1/15
  2. Duration of the lease: 4 years
  3. Life of the leased asset: 5 years
  4. Lease Payments (annual): $320,000 (annual) which includes $40,000 for Maintenance and insurance costs per annum.
  5. Guaranteed residual value (Added to the final payment): $120,000
  6. Interest Rate: 10%

Problem a) Determine the present value of minimum lease rental payment

Reference no: EM132828279

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