Lease Payments

Montevallo Corporation leased equipment from Folio Company. The lease term is 10 years, requires payments of $25,000 at the end of each year, and contains a bargain purchase option. At the end of the lease, Montevallo has an option to pay $4,000 (which is significantly less than the estimated fair value at that time) to purchase the equipment. The equipment has a fair value at the inception of the lease of $175,000 and an estimated useful life of 20 years. The lease agreement stipulates that Folio receive a rate of return of 8% each year. Montevallos incremental borrowing rate is 10% each year.

Calculate the present value of the lease payments. For interim computations, carry amounts out to two decimal places. Round your final answer to the nearest dollar.