
Concept explainers
Present Value of an Ordinary Annuity, Present Value of an Annuity Due, Lease Payments. Carfly Barbers decides to lease a second barbershop. The barbershop has a cash price of $200,000. If Carfly borrowed money to purchase the shop, it would incur a 9% interest rate compounded annually. Answer the following questions:
- a. What are the lease payments if the agreement requires eight annual payments beginning today?
- b. What are the lease payments if the agreement requires eight annual payments beginning one year from the agreement date?
- c. What are the lease payments if the agreement requires eight annual payments beginning today and Carfly will be able to buy the barbershop at the end of the eight-year lease paying a $30,000 residual value? (Hint: Subtract the PV of the $30,000 residual value from the cash price of the barbershop to determine the payments using present value tables.)

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Intermediate Accounting - Myaccountinglab - Pearson Etext Access Card Student Value Edition
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- EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
