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On January 1, 20x1, Magnolia Farms Co. sold equipment to

Customer Question

On January 1, 20x1, Magnolia Farms Co. sold equipment to Waco Corporation for $180,000, its fair value. The equipment, which is new, has a cost of $100,000, a useful life of 5 years, and a salvage value of zero. Magnolia Farms immediately leased 40% of the equipment back for a period of 5 years, agreeing to pay $12,000 per year on December 31, 20x1-20x5. and rate is 8%.
I would like to figure out the present value.
Submitted: 1 year ago.
Category: Business and Finance Homework
Expert:  PDtax replied 1 year ago.

Hi from just answer. I'm PDtax. I can assist.

I'll be back at my computer in a few hours. Please confirm the following:

You want the present value of the 40% lease, 5 years, 8%, and $72,000 fair value. Your lease payments of $12,000 per year are not enough for a capital lease with zero damage value.

Oh the fair value should be $40,000, for example, please confirm.

PDtax