Homework Answers
Lease Payment = $32,000
Remaining Term = 20 years
Discount Rate = 13%
Present Value of Lease Payments = $32,000/1.13 + $32,000/1.13^2
+ … + $32,000/1.13^19 + $32,000/1.13^20
Present Value of Lease Payments = $32,000 * (1 - (1/1.13)^20) /
0.13
Present Value of Lease Payments = $32,000 * 7.024752
Present Value of Lease Payments = $224,792.06
Therefore, capitalized value of the lease is $224,792.06 or $224,792
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