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Sir,
One more question to ask from the mock of opentuition. It relates to the lease of the asset. It states that:
A company agrees to lease the asset for 8 years with equal payments at the start of each year. NPV at the agreement at 10% $52,000.
What is the Annual lease payment?Please guide me as to how to reach the answer.
Thanks
Also, I am unable to unveil the answer in the explanation of the correct answer portion, like not all of it.
If X is the annual lease payment, then the PV of the first payment (which is ‘now’) is X.
The PV of the remaining 7 payments is X x the 7 year annuity factor.Therefore the PV = 52,000 = X + 4.868X
Therefore X = 52,000 / 5.868 = 8,862
The Paper MA (was F2) lectures on discounting will help you, because this is revision of Paper MA
Thank you now I got this.
Can you please help me as to how can I open the complete answer as just part of the answer can be seen.
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