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Good evening sir
Please help me clarify this part of leases. In your lectures you get the PV of the cash flows and subtract the advanced payment and the get the interest but I have noticed in some questions in the bpp the don’t subtract the future payment and just get the interest directly and then ignore the advanced payment and that is the liability element.
Is their a criteria I am not aware of please clarify.
This all depends on the terminology used in the question and whether they give you the present value of lease payments, or present value of future lease payments. I recall that there is an illustration in the class notes to help you in this understanding. Have a read through and let me know if you have any issues moving forward.