Given:
Fair value of leased asset=600000
Useful life=10 years
lease term=7years
Payment frequency=annual
Payment timing=beginning of year
residual value(unguaranteed)=35000
interest rate implicit in the lease=6%
Lessee’s incremental borrowing rate=5%
ASK:
Determine the amount of lease payment that the lessor would require to lease the asset.
I have figured out that the present value of ungauranteed residual value is 23277.
I don’t understand how to get the number of years at implicit rate 6%? Why is it 5.9173? And how is the annual payments required by lessor $97463? How exactly do i get that number by using a financial calculator?
