Hello, Capital Lease question financing, question, payments, contain, getting

scr879

Hello,
I should know this one by now. I think i am just getting burnt out.
Annual end of year payments: 16,000
Term of the Lease 10 years
Discount Rate: 10%
Depreciation Method: Straight Lignt
Salvage Value: 0
In the first year of the lease, the cash flow from financing section of the lessees companys statemento f cash flows will contain a lease releated cash flow that is closest to:
a: 6,169
B: 9,831
C: 14,400
D: 16,000

ashycal

C  payment is 16000, interest in 16000*10%=1600, principal (which goes to CFF) is 160001600=14400

Nishant1

A
PV of Lease Payments 98,313
Year 1 Interest Expense
98,313*0.1 = 9,831
Year I Principal Payment
Total Payment  Interest Expense = Principal Payment
16,000  9,831 = 6,169

domani

YES, you are right. I answered this first thing this morning, and my brain wasn’t functioning yet…. it is A, as BCH describes above.

sabre

A. The lease payment is 16,000. The Interest Expense is the discount rate multiplied by the present value of the future lease payments so .10 x 98,313.0737. The principle reduction in CFF section is the Lease Payment minus the Interest Expense, thus 16,000  9,831 = 6168.6.