Lease terms and expectations:
Lease asset: Manufacturing equipment (Type A lease)
Economic life: 7 years
Lease term: Sep 1/15 to Aug 31/19
Lease payments: $5,000 per year (in advance)
Renewal option: 2 additional years at $4,500/yr (assume lessee has significant economic incentive to renew)
FV of leased asset at start: $24,000
Lessor’s initial direct costs: $365
Expected values of asset (not guaranteed):
$6,000 Aug 31/2019 or $1,000 on Aug 31/2021
Rate implicit in lease and incremental borrowing rate are same at 9%
Title retained by lessor

Lease terms and expectations:
Lease asset: Manufacturing equipment (Type A lease)
Economic life: 7 years
Lease term: Sep 1/15 to Aug 31/19
Lease payments: $5,000 per year (in advance)
Renewal option: 2 additional years at $4,500/yr (assume lessee has significant economic incentive to renew)
FV of leased asset at start: $24,000
Lessor’s initial direct costs: $365
Expected values of asset (not guaranteed):
$6,000 Aug 31/2019 or $1,000 on Aug 31/2021
Rate implicit in lease and incremental borrowing rate are same at 9%
Title retained by lessor

Lease terms and expectations:
Lease asset: Manufacturing equipment (Type A lease)
Economic life: 7 years
Lease term: Sep 1/15 to Aug 31/19
Lease payments: $5,000 per year (in advance)
Renewal option: 2 additional years at $4,500/yr (assume lessee has significant economic incentive to renew)
FV of leased asset at start: $24,000
Lessor’s initial direct costs: $365
Expected values of asset (not guaranteed):
$6,000 Aug 31/2019 or $1,000 on Aug 31/2021
Rate implicit in lease and incremental borrowing rate are same at 9%
Title retained by lessor

Lease terms and expectations:
Lease asset: Manufacturing equipment (Type A lease)
Economic life: 7 years
Lease term: Sep 1/15 to Aug 31/19
Lease payments: $5,000 per year (in advance)