A Company Is Given the Option of Entering into a Five-Year,$20,000

question 15

Essay

A company is given the option of entering into a five-year,$20,000 financial lease arrangement that calls for prepaid monthly payments based on a 5 percent lease rate,or borrowing $20,000 through a five-year loan that calls for end-of-month payments based on a 5.4 percent lending rate.What is the NPV of the lease?
I.$275.11
II.$192.92
III.$186.27
IV.$0

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Definitions:

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