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Determine the interest rate implicit in the lease

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Reference no: EM132719703

Question - Modern Ltd has decided to lease a plant from a supplier and has agreed the following terms with the supplier:

Date of inception of lease: 1 July 2019

Duration of lease: 10 years

Life of leased asset: 10 years

Unguaranteed residual value: $15,000

Lease payments: 10,000 at lease inception and $12,000 on 30 June each year for the next 10 years.

Fair value of leased plant at date of lease inception: $97,469

Required - Determine the interest rate implicit in the lease (show detailed workings).

Reference no: EM132719703

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