Technical Review 18-3 (LO18.2) Lease A Using tables: PV = $130,000* (P/AD, 8%, 5) $85,000 (P/AD, 8%, 3) (P/F, 8%, 5) $40,000 (P/F, 8%, 8) = ($130,000 4.31213) ($85,000 2.78326 0.68058) ($40,000 0.54027) = $560,577 $161,010 $21,611 = $743,198 *$145,000 - $15,000 insurance cost = $130,000 Using calculator: PV = PV of 130000 pmt PV of 85000 pmt PV of the 40000 residual valu PV of 130000 : PMT =-130000; I/Y = 8%; N=5, FV =0 CPT PV = 560577 PV of 85000 and 40000: Step 1: PMT = -85000; I/Y = 8%; N=3, FV =-40000 CPT PV at t=5 = 268331 Step 2: FV= 268331; I/Y=8%; N=5; PMT =0 CPT PV=182621 TOTAL PV = 560577 182621 = 743198 Lease B PV = $133,000** (P/AD, 6%, 5) $18,000 (P/F, 6%, 5) = ($133,000 4.46511) ($18,000 0.74726) = $593,860 $13,451 = $607,311 **$145,000 - $12,000 insurance cost = $133,000