Question

Instead of purchasing the equipment for 90,000, the village leases it under a capital lease arrangement. The term of the lease is 3 years. The village agrees to make three annual payments of 36,190. What is the total cost of leasing the equipment?

1) 108,570
2) 90,000
3) 36,190
4) 72,380

Answer 1

The total cost of leasing the equipment is $108,570.

Step-by-step explanation:

The total cost of leasing the equipment can be calculated by multiplying the annual payment by the number of years in the lease term. In this case, the annual payment is $36,190 and the lease term is 3 years.

Total cost of leasing = Annual payment × Lease term

Total cost of leasing = $36,190 × 3

Total cost of leasing = $108,570

Therefore, the correct answer is 1) 108,570.