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I have tried to work back from the NPV in this question but I cannot make it to give me the correct anwer.
The question is:A lease agreement has a net present value of 32,000 at a discount rate of 10%. The lease involves 5 equal payments, payable a the start of each year.
What is the amount of the annual payment?I know the answer is 7,674 but I cannot get my workings to get this answer.
I would appreciate your help.
ThanksAs we are paying in start of the each year so 1st year lease will be paid in year 0. So 4 year’s annuity factor is 3.170. 4 year annuity factor plus 1 equal to 4.170 then divide NPV by annuity factor 4.170. Then you’ll find your answer.
mabs6601: Thank you for answering, but please do not answer in this forum because it is the Ask the Tutor Forum and you are not the tutor 🙂
(But please do answer in the other F9 forum and help other students 🙂 )yoli100: the answer that mabs6601 has given is correct 🙂
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