Air Atlantic (AA) has been offered a 3-year-old jet airliner under a 12-year lease arrangement. The lease requires AA to make annual lease payments of $500,000 at the beginning of each of the next 12 years. Determine the present value of the lease payments if the opportunity cost of funds is 14 percent. a. $13,635,500 b. $3,226,200 c. $2,830,000 d. $6,000,000
Air Atlantic (AA) has been offered a 3-year-old jet airliner under a 12-year lease arrangement. The lease requires AA to make annual lease payments of $500,000 at the beginning of each of the next 12 years. Determine the present value of the lease payments if the opportunity cost of funds is 14 percent. a. $13,635,500 b. $3,226,200 c. $2,830,000 d. $6,000,000
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Air Atlantic (AA) has been offered a 3-year-old jet airliner under a 12-year lease arrangement. The lease requires AA to make annual lease payments of $500,000 at the beginning of each of the next 12 years. Determine the present value of the lease payments if the opportunity cost of funds is 14 percent.
| a. |
$13,635,500
|
|
| b. |
$3,226,200
|
|
| c. |
$2,830,000
|
|
| d. |
$6,000,000
|
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