What is the annual rental payment

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Question - Elon Company leased an asset to another entity. The cost of the asset was P7,994,000 Terms of the lease specify four year life for the lease, an annual interest rate of 15%, and four year end rental payments. The lease qualifies as a finance lease and is classified as a direct financing lease. The lease provides for a transfer of title to the lessee at the end of the lease term. After the fourth year, the residual value is estimated to be P1,000,000. The PV of 1 at 15% for 4 periods is .572, and the PV of an ordinary annuity of 1 at 15% for 4 periods is 2.855. What is the annual rental payment?

a. 2,000,000

b. 3,000,350

c. 2,800,000

d. 2,599,650

Reference no: EM132812288

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