Question

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. $2,830,000
b. $13,635,500
c. $6,000,000
d. $3,226,200

Answer

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