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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 (Ignore income taxes.):
Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using the tables provided.
a. $14,103
b. $14,808
c. $12,528
d. $11,050

Sagot :

Tundexi

Answer:

c. $12,527

Explanation:

Year   Lease payment   PV factor at 5%  PV of lease payment

1             $2,468                      0.952                    $2,350

2            $2,468                      0.907                     $2,238

3            $2,468                      0.864                     $2,132

4            $2,468                      0.823                     $2,031

5            $2,468                      0.784                     $1,935

6            $2,468                      0.746                     $1,841

Total                                                                       $12,527

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