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15 November, 00:41

Lane co. has a machine that cost $500,000. it is to be leased for 20 years with rent received at the beginning of each year. lane wants a return of 10%. calculate the amount of the annual rent.

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  1. 15 November, 00:43
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    Use the formula of the present value of an annuity due which is

    Pv=pmt [ (1 - (1+r) ^ (-n)) : r] * (1+r)

    Pv present value 500000

    PMT amount of the annual rent?

    R rate of return 0.1

    N time 20 years

    Solve the formula for PMT

    PMT=pv:[ (1 - (1+r) ^ (-n)) : r] * (1+r)

    PMT=500,000: (((1 - (1+0.1) ^ (-20))

    : (0.1)) * (1+0.1))

    =53,390.73 round your answer to get 53391
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