Example - Lease Payment with Residual

Example - Lease Payment with Residual

Background     The Event Names and Weighted Unknown features in TValue 7 are particularly useful for leasing scenarios. You can label the various events for commission, first and last payment, residual, and other nonstandard events. You can use Weighted Unknowns to easily calculate the amount of two unknown advance payments. Both of these features are illustrated in the following example.

Facts     Cirrus Industries leases a printing press with a fair market value of $168,440 to Martel Printing on July 1, 2025. Terms of the lease call for two payments to be made at inception followed by 58 monthly payments. The annual interest rate is 8.29%. The payments are to be calculated assuming a 20% residual at the end of the lease term of $33,688.

Needed     The Monthly Payment Amount.

Settings     This example assumes Normal amortization (Compute Method) and a Year Length of 365 days (set in the Calculations group on the Configuration ribbon).

  1. Enter Martel Printing - press lease in the Label field, choose Monthly as the Compounding Period, and then enter 8.29 in the Nominal Annual Rate field.
  2. On the first cash flow line, click in the Event field and choose Lease from the drop-down list, type 070125 in the Date field, and enter 168,440 in the Amount field.
  3. On the second cash flow line, choose Lease Payment as the Event, type 070125 in the Date field, and type 2X in the Amount field.

    Your screen will look like this:

    ** SCREEN SHOT HERE **

    The 2.000x in the Lease Payment Amount field represents the two unknown payments at the lease inception.

  4. Enter the remaining cash flow information for the lease as shown below.

    ** SCREEN SHOT HERE **

    Note: Notice the Date of the Residual on line 4 has been advanced two months to occur at the end of the Lease term since 2 payments were taken upon inception. This date may vary for your situation.

  5. Press [F9], [Ctrl]+[U], or click Calculate from the Compute group to compute the Lease Payment Amount.

Solution     The Monthly Payment is $2,943.36. Two payments upfront total $5,886.72.