On January 1, 2017, XYZ Company signed an 8-year lease agreement for equipment. Annual payments are $28,500 at the end of each year. At the end of the lease, the equipment will revert to the lessor. The equipment has a useful life of 8 years and has no residual value. At the time of the lease agreement, the equipment has a fair value of $166,000. An interest rate of 10.5% and double declining depreciation are used. This is a finance lease

a. First, calculate the PV of all lease payments using the following formula: