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Question
1. Five payments of $26,379.74 (a 9% implicit rate) due at the end each year.2. The fair value of the tractor is $100,000.
3. The lease is nonrenewable and the tractor reverts to Star at the end of the lease term.
4. The tractor has a six-year economic life.
5. Hatfield has an excellent credit rating.
6. Star offers no warranty on the tractor other than the manufacturer's two-year warranty that is handled directly with the manufacturer.
If Hatfield's incremental borrowing rate is 11% and the implicit rate is not known to the lessee, what interest rate will Hatfield use to account for this lease?
A. 9%
B. 10%
C. 11%
D. Cannot be determined from information given.
Answer
This answer is hidden. It contains 68 characters.
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