Red Sun Rising Corp. has just signed a lease for its new manufacturing facility. The lease...

Red Sun Rising Corp. has just signed a lease for its new manufacturing facility. The lease agreement calls for annual payments of $1,400,000 for 25 years with the first payment due today. If the interest rate is 3.37 percent, what is the value of this liability today?

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Expert Solution

Present value of annuity due=(1+rate)*Annuity[1-(1+interest rate)^-time period]/rate

=1.0337*1,400,000[1-(1.0337)^-25]/0.0337

=1,400,000*17.2798554

which is equal to

=$24,191,797.42(Approx)

jeff jeffy answered 2 years ago

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