The Deluxe Corporation has just signed a 144-month lease on anasset with a 17-year life. The minimum lease payments are $2,200per month ($26,400 per year) and are to be discounted back to thepresent at a 11 percent annual discount rate. The estimated fairvalue of the property is $210,000. Use Appendix D for anapproximate answer but calculate your final answer using theformula and financial calculator methods. Assume the lease is setup as an annual lease.
Calculate the lease period as a percentage to the estimated lifeof the leased property. (Do not round intermediatecalculations. Input your answer as a percent rounded to 2 decimalplaces.)
Calculate the present value of lease payments as a percentage tothe fair value of the property.
Should the lease be recorded as a capital lease or an operatinglease.
