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

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.

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.

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

ashycal

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