The present value (PV)of the lease payments for the delivery truck is closest to:
A)$246 459
B)$265 087
C)$256 087
D)$264 954

Question

Quizplus · Accepted Answer

To calculate the present value (PV) of lease payments, we need to use the Present Value of an Annuity formula:

PV = PMT x [(1 - (1 + r/n)^(-nt)) / (r/n)]

Where:
PMT = Lease payment amount = $15,000
r = Interest rate per year = 8%
n = Number of compounding periods per year = 12
t = Total number of years of lease = 5

Plugging in these values, we get:

PV = $15,000 x [(1 - (1 + 0.08/12)^(-12*5)) / (0.08/12)] = $265,087

Therefore, the closest value to the present value of lease payments is option B) $265,087.

The Present Value (PV)of the Lease Payments for the Delivery