Ask Question
21 March, 16:30

Moore's Inc. will be making lease payments of $3,895.50 for a 10-year period, starting at the end of this year. If the firm uses a 9 percent discount rate, what is the present value of this annuity? (Round to the nearest dollar.)

+5
Answers (1)
  1. 21 March, 16:47
    0
    PV of lease annuity is $25000

    Explanation:

    As the paymengt will be made at the end of the year, the annuity is an ordinary annuity. We will calculate the present value of the ordinary annuity using the following formula,

    PV Annuity = PMT * [ (1 - (1+r) ^-n) / r]

    Where,

    PMT is periodic payment r is discount rate per peiod n is number of periods

    Thus,

    PV of annuity = 3895.5 * [ (1 - (1+0.09) ^-10) / 0.09]

    PV of annuity = $24999.985 rounded off to $25000
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “Moore's Inc. will be making lease payments of $3,895.50 for a 10-year period, starting at the end of this year. If the firm uses a 9 ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers