Calculation of Interest Rate Implicit In Net Present Value And Impact Of Capital Leases On Balance Sheet
On its 2012 balance sheet, Bobcat Company reports minimum capital lease payments of $350,000 to be paid as follows:
2013 $100 thousand,
2014 $140 thousand, and
2015 $110 thousand.
The company also discloses a net present value of these payments of $311 thousand.
1. How is Bobcat’s balance sheet affected by these capital leases?
2. What is the interest rate implicit in this net present value?
These short answer questions belong to Finance. The 1st question is about the impact of capital leases on balance sheet and the 2nd question is about calculation of interest rate implicit in net present value.
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