Question

A construction company agreed to lease payments of $411.76 on construction equipment to be made at the end of every month for 6 years. financing is at 8% compounded monthly. what is the value of the original lease contract?

Answer 1

The value of the original lease contract is $22,930.42.

Step-by-step explanation:

To find the value of the original lease contract, we can use the formula for the present value of an annuity. In this case, the lease payments of $411.76 are made monthly for 6 years, and the financing rate is 8% compounded monthly. The formula to calculate the present value of an annuity is PV = PMT * (1 - (1 + r)^(-n)) / r, where PV is the present value, PMT is the payment amount, r is the interest rate per period, and n is the number of periods. Plugging in the values, we have PV = 411.76 * (1 - (1 + 0.08/12)^(-12*6)) / (0.08/12). Evaluating this expression gives us the value of the original lease contract to be $22,930.42.