A dealer in machinery, Shakti Equipments Pvt. Ltd., leased out one of its machines to Delta Tools Ltd. on a 3-year operating lease. The machine was…

A dealer in machinery, Shakti Equipments Pvt. Ltd., leased out one of its machines to Delta Tools Ltd. on a 3-year operating lease. The machine was given on equal annual lease rentals, and the dealer intended to earn a 20% profit margin on the cost of the machinery. The cost of the machinery to the dealer was - 3,00,000. The economic life of the machinery is estimated at 5 years, and the total expected output over its useful life is given below: Year Estimated Output (units) I 50,000 II 60,000 III 40,000 IV 65,000 V 85,000 Under the lease agreement, Delta Tools Ltd. will use the machine for 3 years (Years I-III) and then return it to Shakti Equipments Pvt. Ltd. The dealer recognizes revenue as per AS 9 Revenue Recognition, since the transaction represents revenue from services rendered in the form of lease rentals. You are required to compute the amount of annual lease rent that will provide the dealer with a 20% profit margin on cost.