Example: Lease With Advance Payments. <RXU￿FRPSDQ\￿￿4XLFN￿.LW￿ 3ROH￿%DUQV￿￿SODQV￿WR￿OHDVH￿D￿IRUNOLIW￿IRU￿WKH￿ZDUHKRXVH￿￿7KH￿OHDVH￿LV￿ZULWWHQ￿ IRU￿D￿WHUP￿RI￿￿￿\HDUV￿ZLWK￿PRQWKO\￿SD\PHQWV￿RI￿￿￿￿￿￿￿￿￿3D\PHQWV￿DUH￿GXH￿ DW￿WKH￿EHJLQQLQJ￿RI￿WKH￿PRQWK￿ZLWK￿WKH￿ILUVW￿DQG￿ODVW￿SD\PHQWV￿GXH￿DW￿WKH￿ RQVHW￿RI￿WKH￿OHDVH￿￿<RX￿KDYH￿DQ￿RSWLRQ￿WR￿EX\￿WKH￿IRUNOLIW￿IRU￿￿￿￿￿￿￿￿￿DW￿ WKH￿HQG￿RI￿WKH￿OHDVLQJ￿SHULRG￿

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PV = ?I/YR = 9%N = 48

P/YR = 12

1

2

3

4

. . .

44

45

46

47

48

 

PMT = -2,400.00(48th payment due up front)FV = -15,000.007KLV￿VROXWLRQ￿UHTXLUHV￿IRXU￿VWHSV￿￿￿ &DOFXODWH￿WKH￿SUHVHQW￿YDOXH￿RI￿WKH￿￿￿￿PRQWKO\￿SD\PHQWV￿￿￿￿￿ï￿￿￿￿￿²￿￿￿ ￿￿￿￿￿￿$GG￿WKH￿YDOXH￿RI￿WKH￿DGGLWLRQDO￿DGYDQFH￿SD\PHQW￿￿￿)LQG￿WKH￿SUHVHQW￿YDOXH￿RI￿WKH￿EX\￿RSWLRQ￿￿￿6XP￿WKH￿YDOXHV￿FDOFXODWHG￿LQ￿VWHSV￿￿￿DQG￿￿￿Step 1￿￿)LQG￿WKH￿SUHVHQW￿YDOXH￿RI￿WKH￿PRQWKO\￿SD\PHQWV￿

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5: Time Value of Money Calculations 65