Latting Corporation has entered into a 7 year lease for a building it will use as a warehouse. The annual payment under the lease will be $4,781. The first payment will be at the end of the current year and all subsequent payments will be made at year-ends. What is the present value of the lease payments if the discount rate is 6%? A) $31,573B) $22,257C) $33,467D) $26,688

Question

Brayan

Business

18 February, 21:03

Latting Corporation has entered into a 7 year lease for a building it will use as a warehouse. The annual payment under the lease will be $4,781. The first payment will be at the end of the current year and all subsequent payments will be made at year-ends. What is the present value of the lease payments if the discount rate is 6%? A) $31,573B) $22,257C) $33,467D) $26,688

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Gerald Houston · Answer 1

D) $26,688

Explanation:

The computation of the present value is shown below:

= Annual payment * PVIFA for 7 years at 6%

= $4,781 * 5.5824

= $26,688

Refer to the PVIFA table

Simply we multiply the annual payment with the PVIFA so that the accurate amount can come.

The present value is come after considering the discount rate for the given number of periods