The fair value of the equipment is $323,400, which means Glade could sell the equipment today for $323,400 and invest it in another investment earning 8% per year rather than leasing the equipment. The problem states it is a direct financing lease so we do not have to consider "normal profit" as in sales type leases. The present value for 5 years is 4.312, so we divide that into the 323,400 to determine the annual payment. The annual payment is 75,000; multiply that by 5 years, and the total proceeds equal 375,000. That means, $51,600 is the amount of interest revenue Glade earns over the life of the lease.

	Payment	Interest = (Balance x 8%)	Principal = (Payment - Interest)	Balance = (Balance - Principal)
				323,500
YR 1	75,000	-	75,000	248,500
YR 2	75,000	19,880	55,120	193,380
YR 3	75,000	15,470	59,530	133,850
YR 4	75,000	10,708	64,292	69,558
YR 5	75,000	5,565	69,435	123
		51,623