The lessor determines the amount of the rental payment using the rate of return the lessor needs to receive in order to justify leasing the asset (this is called the implicit rate of return).
From a conceptual standpoint, the total amount to be recovered through lease payments should be equal to the asset’s initial fair market value minus the present value of the residual value.
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Edspira’s mission is to make a high-quality business education accessible to all people.
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