Question

In: Finance

Jeff has signed an auto lease contract.You will need to pay $400 at the beginning of...

Jeff has signed an auto lease contract.You will need to pay $400 at the beginning of each month for the next 5 years. Your personal discount rate is 4.2% APR. What is the present value of all yuor payments?

23,032.63

1,770.77

21,689.19

21,613.54

8,717.04

Solutions

Expert Solution

First Step to calculate answer in All time value of money options is to calculate the variables like rate, period, payment frequency, compunding etc.

So i this question monthly compunding is there so

N= 5 x 12 = 60, Rate = 4.2/12 = 0.35%, Monthly payment= 400 and payment is due at the beginning of month.

You can solve this with BGN or without BGN mode on texas BA 2.

With BGN mode = N=60,I/Y=0.35, PMT=400,Fv0= compute PV = 21689.19

Without BGN mode= N=59, I/Y= 0.35, PMT=400, FV=0, Compute PV= 21289.19 and then add 400 more in this payment you will get 21689.19. this is because 1st payment due today and no discount effect is there for 1st payment.


Related Solutions

Don Draper has signed a contract that will pay him $55,000 at the beginning of each...
Don Draper has signed a contract that will pay him $55,000 at the beginning of each year for the next 9 years, plus an additional $150,000 at the end of year 9. If 8 percent is the appropriate discount​ rate, what is the present value of this​ contract? The present value of the contract is $_______?
Don Draper has signed a contract that will pay him $80,000 at the beginning of each...
Don Draper has signed a contract that will pay him $80,000 at the beginning of each year for the next ​7 years, plus an additional $120,000 at the end of year 7. If 7 percent is the appropriate discount​ rate, what is the present value of this​ contract? What is the present value of ​$80,000 at the beginning of each year for the next 7 years if the discount rate is 7 ​percent?
Bill Preston has signed a contract that will pay him $55,000 at the beginning of each...
Bill Preston has signed a contract that will pay him $55,000 at the beginning of each year for the next 7 ​years, plus an additional $110,000 at the end of year 7. If 12% is the appropriate discount​ rate, what is the present value of this​ contract?
Blue Steel Company, as lessee, signed a lease agreement for equipment for 5 years, beginning December...
Blue Steel Company, as lessee, signed a lease agreement for equipment for 5 years, beginning December 31, 2020. Annual rental payments of $51,025are to be made at the beginning of each lease year (December 31). The interest rate used by the lessor in setting the payment schedule is 6%; Blue’s incremental borrowing rate is 8%. Blue is unaware of the rate being used by the lessor. At the end of the lease, Blue has the option to buy the equipment...
Tamarisk Steel Company, as lessee, signed a lease agreement for equipment for 5 years, beginning December...
Tamarisk Steel Company, as lessee, signed a lease agreement for equipment for 5 years, beginning December 31, 2020. Annual rental payments of $61,020 are to be made at the beginning of each lease year (December 31). The interest rate used by the lessor in setting the payment schedule is 7%; Tamarisk’s incremental borrowing rate is 9%. Tamarisk is unaware of the rate being used by the lessor. At the end of the lease, Tamarisk has the option to buy the...
Carla Vista Steel Corporation, as lessee, signed a lease agreement for equipment for five years, beginning...
Carla Vista Steel Corporation, as lessee, signed a lease agreement for equipment for five years, beginning January 31, 2020. Annual rental payments of $45,000 are to be made at the beginning of each lease year (January 31). The insurance and repairs and maintenance costs are the lessee’s obligation. The interest rate used by the lessor in setting the payment schedule is 9%; Carla Vista’s incremental borrowing rate is 10%. Carla Vista is unaware of the rate being used by the...
Marin Steel Company, as lessee, signed a lease agreement for equipment for 5 years, beginning December...
Marin Steel Company, as lessee, signed a lease agreement for equipment for 5 years, beginning December 31, 2020. Annual rental payments of $46,000 are to be made at the beginning of each lease year (December 31). The interest rate used by the lessor in setting the payment schedule is 7%; Marin’s incremental borrowing rate is 9%. Marin is unaware of the rate being used by the lessor. At the end of the lease, Marin has the option to buy the...
Pronghorn Steel Company, as lessee, signed a lease agreement for equipment for 5 years, beginning December...
Pronghorn Steel Company, as lessee, signed a lease agreement for equipment for 5 years, beginning December 31, 2020. Annual rental payments of $43,000 are to be made at the beginning of each lease year (December 31). The interest rate used by the lessor in setting the payment schedule is 7%; Pronghorn’s incremental borrowing rate is 9%. Pronghorn is unaware of the rate being used by the lessor. At the end of the lease, Pronghorn has the option to buy the...
Riverbed Steel Company, as lessee, signed a lease agreement for equipment for 5 years, beginning December...
Riverbed Steel Company, as lessee, signed a lease agreement for equipment for 5 years, beginning December 31, 2020. Annual rental payments of $53,000 are to be made at the beginning of each lease year (December 31). The interest rate used by the lessor in setting the payment schedule is 7%; Riverbed’s incremental borrowing rate is 9%. Riverbed is unaware of the rate being used by the lessor. At the end of the lease, Riverbed has the option to buy the...
Pearl Steel Company, as lessee, signed a lease agreement for equipment for 5 years, beginning December...
Pearl Steel Company, as lessee, signed a lease agreement for equipment for 5 years, beginning December 31, 2020. Annual rental payments of $61,020 are to be made at the beginning of each lease year (December 31). The interest rate used by the lessor in setting the payment schedule is 7%; Pearl’s incremental borrowing rate is 9%. Pearl is unaware of the rate being used by the lessor. At the end of the lease, Pearl has the option to buy the...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT