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?

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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