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What amount of annual payments is required under the lease

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Reference no: EM133111937

Question - On June 1, 2020, Ready Leasing Inc. (Ready) purchased a customized piece of robotic machinery for $400,000 (FV of the machine) to be leased to Able Plastics Corp. (Able). The equipment has been customized to Able's specifications and therefore cannot be used by any other party. Details of the lease arrangement are as follows:

Lease term is 12 years, commencing on June 1, 2020.

Able has the option to purchase the equipment for $30,000 at the end of the lease. The estimated value of the equipment at that time is $80,000.

Ready's required rate of return on the lease is 9%.

Able will make annual payments to Ready; the first payment is due on June 1, 2020.

What amount of annual payments is required under the lease?

a. $49,881

b. $51,248

c. $47,604

d. $54,371

Reference no: EM133111937

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