eztomheducationcomhmtpx 6 Rates of Return Discounted Cash

ezto.mheducation.com/hm.tpx 6 - Rates of Return & Discounted Cash Flow Question 11 (of 12) value 6.00 points Your car dealer is willing to lease you a new car for $409 a month for 48 months. Payments are due each month starting with the day you sign the lease contract if the interest rate is 5.1 percent annually with compounding, what is the present value of the lease? O $18,183.31 O $17,800.43 0 $17,774 43 $18,248.51 $17,729.64

Solution

The Answer is “$17,800.43”

Monthly Lease Payment = $409 per month

Monthly Interest Rate = 5.10% / 12 Month = 0.425%

Number of Lease Periods = 48 Months

The payments are made at the beginning of the month

Present value of the lease payments

= $409 x [ (PVIFA 0.425%, 47 Periods) + 1]

= $409 x [42.521843 + 1 ]

= $409 x 43.521843

= $17,800.43

The Present Value Factor for the 47 periods shall be taken and a factor of 1 should be added to the Annuity factor since the payments are made at the beginning of the month