Lease-a-rama co. leases equipment to dunlavy co. over a lease term of 5 years, with equal annual payments starting the first day of the lease. the fair value of the equipment is $500,000 and the expected residual value at the end of the lease term is $50,000. lease-a-rama expects a 12% return on investment as a result of the lease. what is the amount of the equal lease payments dunlavy will make, and at what amount will lease-a-rama record its gross investment in the leaseadditional information: present value of an annuity due of $1 for 5 periods at 12% 4.04 present value of $1 in four periods at 12% 0.64 present value of $1 in five periods at 12% 0.57 lease payment amount gross investment in leasea. $ 116,710 $ 500,000 b. $ 115,842 $ 518,000 c. $ 116,710 $ 633,550 d. $ 115,842 $ 500,000 (a) option a(b) option b(c) option c(d) option d

d. $ 115,842 $ 500,000

Explanation:

Lease-A-Rama invest 500,000

It will require a 12% return

At the end of the lease term. Also the lessor must purchase the 50,000 salvage value at the end of the useful life.

50,000 x 0.64 = 32,000

500,000 - 32,000 = 468,000

468,000 / 4.04  = 115,841.58 Lease payment

PV: of the payment

115,841.58

The gross invesment will be the value of the equipment:

500,000

enlightenment impacted society by introducing the idea that mankind could use reason to discover the laws of the world and the rights of mankind. these ideals affected all factions of society, from politics to religion.

of the three mortgage options that demarco and tanya have to choose from, the balloon payment mortgage would be their best option, over adjustable payment and fixed payment plans.ultimately, the balloon payment plan would save demarco and tanya overall, in interest, would cost less monthly, and they would only have to make these payments for 8 years, opposing to 30 years for adjustable or fixed payment plans. 

overall, demarco and tanya would save $80,811 if they chose balloon payments over fixed payments, and would save $116,711 if they choose balloon payments over adjustable payments. benefits with choosing fixed payments over adjustable payments is that, in the end, the payments will still be $836.30 a month, while with adjustable payments, the initial monthly payments will be $763.38 to $1082.70 a month, ultimately leading to a more costly purchase. benefits with choosing fixed payments over balloon payments are not present. benefits in choosing adjustable payments over is that it has a lower interest rate, and starts with lower monthly payments initially. benefits in choosing adjustable payments over balloon payments include a lower interest rate, and lower initial monthly payments. benefits in choosing balloon payments over fixed payments include lower interest rates, lower overall price, lower monthly payments, takes less time to pay off, and does not require a downpayment. benefits in choosing balloon payments over adjustable payments include, lower monthly payments (when averaged), takes less time to pay off, and lower overall price.

hence, option c, balloon payments, is the best option for demarco and tanya to make this purchase, for it will save them a minimum of $80811, and a maximum of $116,711.