What would be The present value PV of the payments due under

What would be:

The present value (PV) of the payments due under the lease is $?

The present value (PV) of the payments due under the lease is $?

On January 1, 2014, Galactic Manufacturing leased a piece of machinery for use in its North American operations from Kailua Bank. The three-year, non-cancellable lease requires lease payments of $1,300 due at the beginning of each year. The machinery is estimated to have a five-year life and the fair value on the date the lease is signed is $10,100. The lease agreement does not transfer ownership of the machinery, nor does it contain a bargain purchase option. Galactic uses a 10% interest rate to compute the present value of the lease payments.

Solution

The present value (PV) of the payments due under the lease = 1300*PV Annuity factor = 1300*2.73554 = $3556.20