James leases a ski chalet to his best friend, Janet. The lease term is five years with €33,000 annual payments due at the beginning of each year. What is the present value of the payments discounted at 8% per annum?

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Quizplus · Accepted Answer

The present value of the payments is €142,300. This is calculated using the formula for the present value of an annuity, which is:PV = PMT * [1 - (1 + r)^-n] / rwhere:PV is the present valuePMT is the annual paymentr is the annual discount raten is the number of yearsIn this case, the annual payment is €33,000, the annual discount rate is 8%, and the number of years is 5. Plugging these values into the formula, we get:PV = €33,000 * [1 - (1 + 0.08)^-5] / 0.08= €33,000 * [1 - 0.68058] / 0.08= €33,000 * 0.31942 / 0.08= €142,300

James Leases a Ski Chalet to His Best Friend, Janet