Sharp EL738C EL-738 Operation Manual - Page 31

Calculating the present value of a lease with, trade-in value

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Procedure Key operation Display The number of compounding periods per year is automatically set to 12. Press s to exit the P/Y and C/Y settings. Enter the total number s 24 N of payments. 24~N 2400 Enter the future value. 2995 x 10 . % T ANS~FV 29950 Enter payment. , 145 u (-145)~PMT -14500 Enter the present value. 2995 v 2995~PV 299500 Calculate the annual interest rate. @ f I/Y= 708 Answer: If you lease the computer system, the annual interest rate would be 7.08%, which is less than that of the interest rate on a two-year loan, so it would be more cost-effective to lease a computer system than to purchase one. 3 Calculating the present value of a lease with trade-in value Your client wishes to buy a machine currently leased from your company. On a five-year lease with payments of $200 at the beginning of each month, the machine has a trade-in value of $1,500 with 34 monthly payments remaining. If your company sells the machine at the present value of the lease, discounted at an annual interest rate of 18%, compounded monthly, how much should your company charge for the machine? PV = ? PMT = -$200 I/Y = 18% ...... N = 34 FV = -$1,500 30

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30
Procedure
Key operation
Display
The number of compounding periods per year is automatically set to
12. Press
s
to exit the P/Y and C/Y settings.
Enter the total number
of payments.
s
24
N
24~N
2400
Enter the future value.
2995
x
10
.
%
T
ANS~FV
29950
Enter payment.
,
145
u
(-145)~PMT
-14500
Enter the present value.
2995
v
2995~PV
299500
Calculate the annual
interest rate.
@
f
I/Y=
708
Answer:
If you lease the computer system, the annual interest
rate would be 7.08%, which is less than that of the
interest rate on a two-year loan, so it would be more
cost-effective to lease a computer system than to
purchase one.
Calculating the present value of a lease with
trade-in value
Your client wishes to buy a machine currently leased from your
company. On a five-year lease with payments of $200 at the
beginning of each month, the machine has a trade-in value of
$1,500 with 34 monthly payments remaining. If your company
sells the machine at the present value of the lease, discounted
at an annual interest rate of 18%, compounded monthly, how
much should your company charge for the machine?
N = 34
......
PV = ?
FV = –$1,500
I/Y = 18%
PMT = –$200
3