Solved: A firm leases a car using a finance lease the rental, Accounting Basics

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A firm leases a car using a finance lease the rental

Problem

A firm leases a car using a finance lease. The rental payments comprise 5 annual payments of $4,000 with the first rental payment paid one year after commencement of the lease. The fair value of the car at the commencement of the lease is $25,000 and the estimated fair value of the car at the end of the lease is $15,849. To the nearest whole per cent, what is the interest rate implicit in this lease.

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Accounting Basics: A firm leases a car using a finance lease the rental

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