Question

Parker Leasing leased a car to a customer. Parker will receive ​$150 a​ month, at the end of each​ month, for 72 months. Use the PV function in Excel® to calculate the answers to the following questions

1. What is the present value of the lease if the annual interest rate in the lease is 6​%?

2. What is the present value of the lease if the car can likely be sold for ​$8,000 at the end of six ​years?

Answer 1

	Answer
	Explanation :
1)	Annual interest rate	6%
	Monthly payments	150 Months
	Period	72 Months
	Monthly interest rate = 0.6/6 = 0.01 (or) 1%	$               0.01
	PV of lease = PV(0.01,72,-150,0)	$       -7,672.56
2)	Cashflow at the end of Year 6, i.e., 72 months = $8,000
	Annual interest rate	6%
	Monthly payments	150 Months
	Period	72 Months
	Monthly interest rate = 0.6/6 = 0.01 (or) 1%	$               0.01
	PV of lease = PV(0.01,72,-150,0)	$       -7,672.56
	Salvage value	$        8,000.00
	= +PV(1%,72,150,8000)	$     -11,580.53

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