Red Sun Rising Corp. has just signed a lease for its new manufacturing facility. The lease agreement calls for annual payments of $1,800,000 for 15 years with the first payment due today. If the interest rate is 3.53 percent, what is the value of this liability today

PV= $20,687,178.19

Explanation:

Giving the following information:

Annual payments= $1,800,000

Number of periods= 15 years

Interest rate= 3.53%

First, we need to calculate the future value using the following formula:

FV= {A*[(1+i)^n-1]}/i

A= annual payment

FV= {1,800,000*[(1.0353^15) - 1]} / 0.0353

FV= $34,809,233.92

Now, the present value:

PV= FV/(1+i)^n

PV= 34,809,233.92 / 1.0353^15

PV= $20,687,178.19

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