A lease involves payments of $8,000 per month for four years. The payments are made at the

Question:

A lease involves payments of $8,000 per month for four years. The payments are made at the end of each month. The lease also involves a guaranteed residual value of $25,000 to be paid at the end of the 4-year period. Compute the present value of the minimum payments

(1) Using the rate implicit in the lease of 9% compounded monthly and

(2) The lessee’s incremental borrowing rate of 12% compounded monthly.