Red Sun Rising Corp. has just signed a lease for its new manufacturing facility. The lease agreement calls for annual payments of $1,600,000 for 20 years with the first payment due today. If the interest rate is 3.45 percent, what is the value of this liability today

The present value of the liability today is $23,631,155.52

Explanation:

The lease payments form an annuity due as the lease payments meet the criteria of the annuity due. The lease pays equal amount of payments, after equal intervals of time and for a definite period of times. Besides, the payments made are at the start of the period. Thus, it is an annuity due.

The formula to calculate the present value of an annuity due is attached and using this formula we can calculate the present value of the lease liability today.

PV = 1600000 + 1600000 * [ (1 - (1+0.0345)^-19) / 0.0345 ]

PV = $23,631,155.52

a manufacturer of printed circuit boards uses exponential smoothing with trend to forecast monthly demand of its product. at the end of december, the company wishes to forecast sales for january. the estimate of trend through november has been 200 additional boards sold per month. average sales have been around 1000 units per month. the demand for december was 1100 units. the company uses α = 0.20 and β = 0.10. make a forecast including trend for the month of january.