A construction company agreed to lease payments of $514.43 on construction equipment to be made at the end of every month for 8.75 years. Financing is at 11% compounded monthly. (a) What is the value of the original lease contract? (b) If, due to delays, the first 9 payments were deferred, how much money would be needed after 10 payments to bring the lease payments up to date? (c) How much money would be required to pay off the lease after 10 payments? (d) If the lease were paid off after 10 payments, what would the total interest be? (e) How much of the total interest would be due to deferring the first 9 payments?

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter5: The Time Value Of Money
Section: Chapter Questions
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A construction company agreed to lease payments of $514.43 on construction equipment to be made at
the end of every month for 8.75 years. Financing is at 11% compounded monthly.
(a) What is the value of the original lease contract?
(b) If, due to delays, the first 9 payments were deferred, how much money would be needed after 10
payments to bring the lease payments up to date?
(c) How much money would be required to pay off the lease after 10 payments?
(d) If the lease were paid off after 10 payments, what would the total interest be?
(e) How much of the total interest would be due to deferring the first 9 payments?
Transcribed Image Text:A construction company agreed to lease payments of $514.43 on construction equipment to be made at the end of every month for 8.75 years. Financing is at 11% compounded monthly. (a) What is the value of the original lease contract? (b) If, due to delays, the first 9 payments were deferred, how much money would be needed after 10 payments to bring the lease payments up to date? (c) How much money would be required to pay off the lease after 10 payments? (d) If the lease were paid off after 10 payments, what would the total interest be? (e) How much of the total interest would be due to deferring the first 9 payments?
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