Answer:
Manning Imports
The amount of the quarterly lease payments (beginning at the inception of the lease) in order for Manning to recover its normal selling price as well as be compensated for financing the asset over the lease term should be:
Payment Every Quarter = $5,266.65
Explanation:
a) Data and Calculations:
Cash price of equipment = $100,000
Reasonable rate of interest = 8%
Lease period = 5 years
Payment period = 20
From an online financial calculator:
Payment Every Quarter $5,266.65
Total of 20 Payments $105,332.90
Total Interest $5,332.90
Lease Amortization Schedule with quarterly payment of $5,266.65:
Beginning Balance Interest Principal Ending Balance
1 $100,000.00 $500.00 $4,766.65 $95,233.35
2 $95,233.35 $476.17 $4,790.48 $90,442.88
3 $90,442.88 $452.21 $4,814.43 $85,628.45
4 $85,628.45 $428.14 $4,838.50 $80,789.94
Year #1 End
5 $80,789.94 $403.95 $4,862.70 $75,927.25
6 $75,927.25 $379.64 $4,887.01 $71,040.24
7 $71,040.24 $355.20 $4,911.44 $66,128.79
8 $66,128.79 $330.64 $4,936.00 $61,192.79
Year #2 End
9 $61,192.79 $305.96 $4,960.68 $56,232.11
10 $56,232.11 $281.16 $4,985.48 $51,246.63
11 $51,246.63 $256.23 $5,010.41 $46,236.21
12 $46,236.21 $231.18 $5,035.46 $41,200.75
Year #3 End
13 $41,200.75 $206.00 $5,060.64 $36,140.11
14 $36,140.11 $180.70 $5,085.94 $31,054.16
15 $31,054.16 $155.27 $5,111.37 $25,942.79
16 $25,942.79 $129.71 $5,136.93 $20,805.86
Year #4 End
17 $20,805.86 $104.03 $5,162.62 $15,643.24
18 $15,643.24 $78.22 $5,188.43 $10,454.81
19 $10,454.81 $52.27 $5,214.37 $5,240.44
20 $5,240.44 $26.20 $5,240.44 -$0.00
Year #5 End
