How do I Calculate the Present Value of Lease Payments With the Borrow Rate & Tax Margin?
- 1). Determine the lease terms. You need the number of payments on the lease, the amount of payments on the lease and your monthly borrowing rate. For example, a person can borrow money at 2 percent per month. He makes payments of $2,000 a month. The lease is for two years, or 24 payments.
- 2). Find the number of payments on the term side of the present value of an annuity table and the borrowing rate on the top of the table to find the present value of an annuity factor. In the example, the period is 24 and the interest rate is 2 percent, so the present value of an annuity factor is 18.9139.
- 3). Multiply the present value of an annuity factor by the monthly lease payment. In the example, 18.9139 times $2,000 equals $37,827.80. This is the present value of the lease payments.
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