What is the present value of the minimum lease payments

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Problem - Monty Company leases an automobile with a fair value of $15,497 from John Simon Motors, Inc., on the following terms:

1. Non-cancelable term of 50 months.

2. Rental of $350 per month (at end of each month). (The present value at 1% per month is $13,719.)

3. Estimated residual value after 50 months is $1,140. (The present value at 1% per month is $693.) Monty Company guarantees the residual value of $1,140.

4. Estimated economic life of the automobile is 60 months.

5. Monty Company's incremental borrowing rate is 12% a year (1% a month). Simon's implicit rate is unknown.

What is the present value of the minimum lease payments?

Reference no: EM131641558

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