Calculate the probability-weighted value

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Question - Carla Vista Services Inc. accounts for the lease of a truck. The lease includes a residual value guarantee at the end of the lease term of $16,000. Carla Vista estimates that the likelihood that the residual value will be $16,000 has a 50% certainty. Carla Vista feels that there is a 35% chance that the residual value will be $12,600 and a 15% chance that it will be $9,200.

Calculate the probability-weighted value of the residual guarantee that needs to be included in the measurement of the lease payments liability recorded by Carla Vista when the lease is signed.

Reference no: EM132514798

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