Leasing Calculations
Two common leasing calculations are 1) finding the lease payment necessary to achieve a specified yield, and 2) finding the present value (capitalized value) of a lease. Leasing calculations typically use “advance payments”. For the calculator, this means Begin mode because all payments will be made at the beginning of the period. If there are two payments in advance, then one payment must be combined with the present value. For examples with two or more advance payments, see pages 74 and 199.
Example: Calculating a Lease Payment. A new car valued at $13,500 is to be leased for 3 years. The lessee has the option to purchase the car for $7,500 at the end of the leasing period. What monthly payments, with one payment in advance, are necessary to yield the lessor 14% annually? Calculate the payments from the lessor’s point of view. Use Begin payment mode because the first payment is due at the inception of the lease.
7,500
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74 5: Time Value of Money
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