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Titanic Corporation leased executive limos under terms of a $13,500 first payment upon signing the lease...

Titanic Corporation leased executive limos under terms of a $13,500 first payment upon signing the lease and four equal annual payments of $22,000 on the anniversary date of the lease. The interest rate implicit in the lease is 7%. The first year's interest expense would be: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)

Choices are

3780

5216

5320

2981

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Answer #1
Equal annual payments 22000
X PVA of $1 factor 3.38721 =(1-(1.07)^-4)/0.07
Present value of lease payments 74519
First year's interest expense 5216 =74519*7%
Option B 5216 is correct
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