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What annual lease payment should Kerrigan charge Alina

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Question - Kerrigan Inc. manufactures machinery used in the construction industry. On January 1, 2021, it leased equipment to Alina Co. The 5-year lease calls for equal annual payments at the end of each year. The fair value of the equipment is $780,000 at commencement date and it had originally cost Kerrigan $480,000 to purchase. The lease includes a guaranteed residual amount of $100,000.  Kerrigan wants an 5% return on this lease. The equipment has an expected useful life of 8 years. Based on the above, what annual lease payment should Kerrigan charge Alina?

Reference no: EM132961071

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