What is the interest rate that a plant manager is being charged if she decides to lease the robotic welders with no salvage value at $12,000 per year for ten years, starting with an immediate payment, instead of paying a negotiated cash price for them of $74,593.20?

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The interest rate can be calculated using the formula for the present value of an annuity due. The present value of the lease payments ($12,000 per year for 10 years) should equal the cash price ($74,593.20). Solving for the interest rate gives approximately 13%.

What Is the Interest Rate That a Plant Manager Is