Calculate the MP for a lease (annuity due) for $125,500 with terms 6%, 5 years. (a)...

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Question

Calculate the MP for a lease (annuity due) for $125,500 with terms 6%, 5 years. (a)...

Calculate the MP for a lease (annuity due) for $125,500 with terms 6%, 5 years.

(a) Payments are made at the beginning of each month and the Expected Salvage Value is zero

(b) Salvage Value is now $25,000

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business finance

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Answer 1

Answer #1

Annual payment = cost of machine/PVIF(r,n)

(a)
Year	Installment	PV factors	Principal component
0	125500	1	125500
1	125500	0.943396	118396.2
2	125500	0.889996	111694.6
3	125500	0.839619	105372.2
4	125500	0.792094	99407.75

	Total		560370.8



(b)
Year	Installment	PV factors	Principal component
0	125500	1	125500
1	125500	0.943396	118396.2
2	125500	0.889996	111694.6
3	125500	0.839619	105372.2
4	125500	0.792094	99407.75
salvage value	25000	0.792094	-19802.3

	Total		540568.4

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Answer 2

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