What is the NPV of the lease?
A) $111,690
B) $295,040
C) $305,388
D) $309,690

Question

Quizplus · Accepted Answer

To calculate the NPV of the lease, we need to discount the cash flows at the required rate of return. Using the given information, we can calculate the annual lease payment as $60,000 x 1.06 = $63,600. The lease payments are made at the beginning of the year, so we need to adjust the present value accordingly. Using a financial calculator or excel function, we get the present value of lease payments as $305,388. Therefore, the best choice is C) $305,388 as it represents the NPV of the lease.

What Is the NPV of the Lease