Alexander Enterprises leases property to Hamilton, Inc. Because Hamilton, Inc. is experiencing financial difficulty, Alexander agrees to receive five rents of 15,000 at the end of each year, with the rents deferred 3 years. What is the present value of the five rents discounted at 9%? (Round factor values to 5 decimal places, e.g. 1.25124. Round answers to the nearest whole dollar, e.g. 5,275.)
We have been provided with the information that,
Alexander agrees to receive five rents of 15,000 at the end of each year, with the rents deferred 3 years.
the present value of the five rents discounted at 9%
So we will calculate the pV of rents as follow
FV of 15,000 after 2 years =15000*(1.12^2)=$17821
FV of 15000 for 1year =15000*(1.09^1)=$16350
FV of 20,000 after 0 year =15,000=$1500
Summing them up we get: 17821+16350+15000=$49171.5
PV discounted back 3 years = 49171.5/(1.12^3)=$ 37969.42
Year 4 rental prasent value = 15000( PVf 9%, 4)=10626
Year 5 rental prasent value = 15000( PVf 9%, 5)=9748
Total PV= 37969.42 +10626+9748
=69546.85
