Question

Suddeth Corporation has entered into a 6 year lease for a building it will use as a warehouse. The annual payment under the lease will be $2,468. The first payment will be at the end of the current year and all subsequent payments will be made at year-ends. If the discount rate is 5%, the present value of the lease payments is closest to :___________

Answer 1

Answer:

$12,528

Explanation:

The computation of the present value of the lease payment is given below:

= annual payment × PVIFA factor for 6 years at 5%

= $2,468 × 5.0757

= $12,528

We simply multiply the annual payment with the pVIFA factor so that the  present value of the lease payment could come