A lease involves payments of $5,000 per month for three years. The payments are made at the

Question:

A lease involves payments of $5,000 per month for three years. The payments are made at the end of each month. The lease also involves a guaranteed residual value of $20,000 to be paid at the end of the 3-year period. Compute the present value of the minimum payments
(1) Using the rate implicit in the lease of 10% compounded monthly and
(2) The Lessee’s incremental borrowing rate of 12% compounded monthly.