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What would be the amount of the annual rental payments

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Reference no: EM132490416

Question - Marin Company is negotiating to lease a piece of equipment to MTBA, Inc. MTBA requests that the lease be for 9 years. The equipment has a useful life of 10 years. Marin wants a guarantee that the residual value of the equipment at the end of the lease is at least $6.000. MTBA agrees to guarantee a residual value of this amount though it expects the residual value of the equipment to be only $2,500 at the end of the lease term.

If the fair value of the equipment at lease commencement is $80,000, what would be the amount of the annual rental payments Marin demands of MTBA, assuming each payment will be made at the beginning of each year and Marin wishes to earn a rate of return on the lease of 8%?

Reference no: EM132490416

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