calculating minimum lease payment the company should ask for
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Real estate, Inc., has purchased a building for $1 million. the economic life of the building is 30 years and it will be fully depreciated over the 30 years using the straight-line depreciation method. the discount rate is 14% and the coporate tax rate is 35%. assume there is no inflation. what is the minimum lease payment the company should ask for? assume that the lease payment is due immediately.
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Solution Summary
The solution gives the minimum lease payment the company should ask for using the straight-line depreciation method
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I used a financial calculator to calculate the lease.
$1,000,000 Loan
$ 30 years or 360 months
Int rate = 14%
I came up with $11,848.72.
This is where I found the calculator I used: http://www.efunda.com/formulae/finance/lease_payment.cfm
Loan Amount
1,000,000 Residual Value
0 Annual Interest Rate
14%
(Compounded 12 Times/Year) Term
360 periods
(12 Payments/Year)
Period Payment Principal Part Interest Part Balance
1 $11,848.72 $182.05 $11,666.67 $999,817.95
2 $11,848.72 $184.17 $11,664.54 $999,633.77
3 $11,848.72 $186.32 $11,662.39 $999,447.45
4 $11,848.72 $188.50 $11,660.22 $999,258.95
5 $11,848.72 $190.70 $11,658.02 $999,068.26
6 $11,848.72 $192.92 $11,655.80 $998,875.34
7 $11,848.72 $195.17 $11,653.55 $998,680.16
8 $11,848.72 $197.45 $11,651.27 $998,482.72
9 $11,848.72 $199.75 $11,648.97 $998,282.96
10 $11,848.72 $202.08 $11,646.63 $998,080.88
11 $11,848.72 $204.44 $11,644.28 $997,876.44
12 $11,848.72 $206.83 $11,641.89 $997,669.61
Period Payment Principal Part Interest Part Balance
13 $11,848.72 $209.24 $11,639.48 $997,460.37
14 $11,848.72 $211.68 $11,637.04 $997,248.70
15 $11,848.72 $214.15 $11,634.57 $997,034.55
16 $11,848.72 $216.65 $11,632.07 $996,817.90
17 $11,848.72 $219.18 $11,629.54 $996,598.72
18 $11,848.72 $221.73 $11,626.99 $996,376.99
19 $11,848.72 $224.32 $11,624.40 $996,152.67
20 $11,848.72 $226.94 $11,621.78 $995,925.73
21 $11,848.72 $229.58 $11,619.13 $995,696.15
22 $11,848.72 $232.26 $11,616.46 $995,463.89
23 $11,848.72 $234.97 $11,613.75 $995,228.92
24 $11,848.72 $237.71 $11,611.00 $994,991.20
Period Payment Principal Part Interest Part Balance
25 $11,848.72 $240.49 $11,608.23 $994,750.72
26 $11,848.72 $243.29 $11,605.43 $994,507.42
27 $11,848.72 $246.13 $11,602.59 $994,261.29
28 $11,848.72 $249.00 $11,599.72 $994,012.29
29 $11,848.72 $251.91 $11,596.81 $993,760.38
30 $11,848.72 $254.85 $11,593.87 $993,505.54
31 $11,848.72 $257.82 $11,590.90 $993,247.72
32 $11,848.72 $260.83 $11,587.89 $992,986.89
33 $11,848.72 $263.87 $11,584.85 $992,723.02
34 $11,848.72 $266.95 $11,581.77 $992,456.07
35 $11,848.72 $270.06 $11,578.65 $992,186.01
36 $11,848.72 $273.21 $11,575.50 $991,912.79
Period Payment Principal Part Interest Part Balance
37 $11,848.72 $276.40 $11,572.32 $991,636.39
38 $11,848.72 $279.63 $11,569.09 $991,356.76
39 $11,848.72 $282.89 $11,565.83 $991,073.88
40 $11,848.72 $286.19 $11,562.53 $990,787.69
41 $11,848.72 $289.53 $11,559.19 $990,498.16
42 $11,848.72 $292.91 $11,555.81 $990,205.25
43 $11,848.72 $296.32 $11,552.39 $989,908.93
44 $11,848.72 $299.78 $11,548.94 $989,609.15
45 $11,848.72 $303.28 $11,545.44 $989,305.87
46 $11,848.72 $306.82 $11,541.90 $988,999.06
47 $11,848.72 $310.40 $11,538.32 $988,688.66
48 $11,848.72 $314.02 $11,534.70 $988,374.65
Period Payment Principal Part Interest Part Balance
49 $11,848.72 $317.68 $11,531.04 $988,056.97
50 $11,848.72 $321.39 $11,527.33 $987,735.58
51 $11,848.72 $325.14 $11,523.58 $987,410.44
52 $11,848.72 $328.93 $11,519.79 $987,081.51
53 $11,848.72 $332.77 $11,515.95 $986,748.75
54 $11,848.72 $336.65 $11,512.07 $986,412.10
55 $11,848.72 $340.58 $11,508.14 $986,071.52
56 $11,848.72 $344.55 $11,504.17 $985,726.97
57 $11,848.72 $348.57 $11,500.15 $985,378.40
58 $11,848.72 $352.64 $11,496.08 $985,025.77
59 $11,848.72 $356.75 $11,491.97 $984,669.02
60 $11,848.72 $360.91 $11,487.81 $984,308.10
Period Payment Principal Part Interest Part Balance
61 $11,848.72 $365.12 $11,483.59 $983,942.98
62 $11,848.72 $369.38 $11,479.33 $983,573.60
63 $11,848.72 $373.69 $11,475.03 $983,199.91
64 $11,848.72 $378.05 $11,470.67 $982,821.85
65 $11,848.72 $382.46 $11,466.25 $982,439.39
66 $11,848.72 $386.92 $11,461.79 $982,052.47
67 $11,848.72 $391.44 $11,457.28 $981,661.03
68 $11,848.72 $396.01 $11,452.71 $981,265.02
69 $11,848.72 $400.63 $11,448.09 $980,864.40
70 $11,848.72 $405.30 $11,443.42 $980,459.10
71 $11,848.72 $410.03 $11,438.69 $980,049.07
72 $11,848.72 $414.81 $11,433.91 $979,634.26
Period Payment Principal Part Interest Part Balance
73 $11,848.72 $419.65 $11,429.07 $979,214.61
74 $11,848.72 $424.55 $11,424.17 $978,790.06
75 $11,848.72 $429.50 $11,419.22 $978,360.56
76 $11,848.72 $434.51 $11,414.21 $977,926.05
77 $11,848.72 $439.58 $11,409.14 $977,486.47
78 $11,848.72 $444.71 $11,404.01 $977,041.76
79 $11,848.72 $449.90 $11,398.82 $976,591.86
80 $11,848.72 $455.15 $11,393.57 $976,136.72
81 $11,848.72 $460.46 $11,388.26 $975,676.26
82 $11,848.72 $465.83 $11,382.89 $975,210.43
83 $11,848.72 $471.26 $11,377.46 $974,739.17
84 $11,848.72 $476.76 $11,371.96 $974,262.41
Period Payment Principal Part Interest Part Balance
85 $11,848.72 $482.32 $11,366.39 $973,780.09
86 $11,848.72 $487.95 $11,360.77 $973,292.14
87 $11,848.72 $493.64 $11,355.07 ...
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