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Sir,
Company leased a machine for period of 8 years . NPV of the leased at 10% is $52,000.
what is the annual lease payment?please show me the calculation . How can I calculate?
The question also says that the lease payments are made at the start of each year, so there is one payment at time 0 and then 7 more payments from time 1 to 7.
If each payment is $X, then the payment at time 0 has a PV of X. The payments from 1 – 7 have a PV of 4.868X.
So the total PV is X + 4.868X = 5.868X = 52,000.Now it is no problem calculating X 🙂
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