The lessor Cerizay leases a packaging line with a fair value of 95,356. To conclude the lease, it incurred initial direct costs of 1,800 (negotiation and drafting fees). The lessee pays 5 annual payments of 22,000, in arrears, and Cerizay expects an unguaranteed residual value of 6,000. The interest rate implicit in the lease, which takes the initial direct costs into account, is 6 %. Compute the net investment at the commencement date, rounded to the nearest euro.
- Fair value of the packaging line
- 95,356
- Lessor's initial direct costs
- 1,800
- Annual payment in arrears
- 22,000
- Number of annual payments
- 5
- Unguaranteed residual value
- 6,000
- Interest rate implicit in the lease
- 6 %