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What is the initial value of the equipment

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Question - Assume Melissa's Magic Markers wishes to lease a piece of equipment for 5 years. The economic life of the equipment is 6 years. The borrowing cost is assumed to be 10%.

The market value of the equipment is $750,000 and the annual lease payment due at the end of each year is $191,242.50.

The present value factor for an annuity for 5 years at 10% is 3.791. The present value factor for an annuity for 6 years at 10% is 4.355.

Required - What is the initial value of the equipment that Melissa's Magic Markers will record on the balance sheet (as both an asset and liability) at lease inception, rounded to the nearest dollar?

Reference no: EM133186401

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