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,r,[
Erample: Present lGapitalizedl
Value
of a
Lease
with
Ad.
Yanced Payments and Option
to
Buy. Your company is leasing
a
machine
for 4
years.
Monthly payments are $2,400
with two
pay-
ments
in
advance.
The leasing
agreement
includes
an option to
bry
the
machine
for
$15,000
at the end
of
the
leasing
period. What is
the
capitalized value
of
the
lease,
assuming
that the interest rate you
pay
to borrow funds is
"1,8o/o,
compounded
monthly?
N:47
IT"YR:18
P/YR:12;
Begin
mode
4,900
The problem is done
in
four
steps:
1.
With future
value
set
to
0,
calculate
the
present
value
of the
47
monthly
payments.
2^
^Add
to the
calculated present value
the additional
advance
payment.
3.
Find the present value
of
the
bry
option.
4.
Sum
the present values calculated
in
steps
2
and
3.
PV:?
FV
:
-
15,000
174
9: Additional Eramples
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