Finance Lease Agreement: their are many math matical solustion which is discusse under below_
Monthly lease rental = PV/a
a= [ 1-(1+.16/12)-60/.16/12] (1+.16/12)
- Consider the following information for a lease agreement:
Lease term 5 years
Cost of equipment Tk 5,00,000
Nominal interest rate 16%
Mode of rental payment Monthly
Requirements:
i) Calculate the monthly rental in arrear.
ii) Calculate the monthly rental in advance.
iii) Calculate the monthly rental with 6 payments in advance.
iv) Calculate the effective annual interest rate (EAR).
v) What will be monthly rental if you consider a residual value of Tk 50,000 in case (i) and (ii).
Solution:
i) Calculation of monthly rental in arrear:
Monthly lease rental, = PV/a a= 1-(1+r)n/ r
a= 1-(-0.16/12)-60 /0.16/12 = 41.1577
So Monthly Lease rental = 500000/ 41.577
=Tk 12148.40
ii) Calculation of monthly lease rental in advance:
= 41.7060
Monthly lease rental in advance = 500000/41.7060
= TK.11988.68
iii) Calculation of monthly rental with 6 payments in advance: Finance Lease Agreement
Monthly lease rental (6 payments in advance) a= [ 1-(1+.16/12)-60/.16/12] (1+.16/12)
= 44.350
So, Monthly lease rental (6 payments in advance) =5 00000/44.350
= Tk 11273.96
iv) Calculation of effective annual interest rate (EAR):
So, EAR = (1+_.16/12)12-1)
Or 17.18%
v) Calculation of Monthly lease rental when residual value is Tk 50,000
Present value of residual value =500000(1+.16/12) -5X12
= Tk 22630.15
Amount to be amortized = (500000 – 22630.15)
= 477369.85
Monthly lease rental (in arrear) = 47736.85
=Tk 11598.56
Monthly lease rental (in advance) = 46736.85/ 41.1577
=Tk 11446.07
vii) If we consider the residual value, there is no effect on EAR. Because residual value’s has no effect on nominal interest rate and lease term and mode of rental payment. Finance Lease Agreement
No comments:
Post a Comment