Answer:
Amount to be recovered = $650,000
Present value of bargain purchase option = $150,000 * PV factor at 6% for 6th period
= $150,000 * 0.704961 = $105,744
Amount to be recoverd through periodic lease payment = $650,000 - $105,744 = $544,256
Annual lease payment = $544,256 / Cumulative PV factor for annuity due at 6% for 6 periods
= $544,256 / 5.212364
= $104,416
Explanation:
Amount to be recovered = $650,000
Present value of bargain purchase option = $150,000 * PV factor at 6% for 6th period
= $150,000 * 0.704961 = $105,744
Amount to be recoverd through periodic lease payment = $650,000 - $105,744 = $544,256
Annual lease payment = $544,256 / Cumulative PV factor for annuity due at 6% for 6 periods
= $544,256 / 5.212364
= $104,416