The total cost will be $1,000,000 for the new equipment. The engineering company designing the upgrades estimates that the improvements will save the company $149,250 per year in energy and fuel costs. As a public entity paying taxes are not an issue for the school district.
If all of these savings are applied to the lease payments, and if the lessor wants to earn an 8% return, how long will the life of the lease be? Assume all savings and lease payments occur at the end of the period.© BrainMass Inc. brainmass.com March 5, 2021, 12:34 am ad1c9bdddf
Rate of return=i=8%
Periodic lease payment=R=$149,250
Total cost =PV=$1,000,000
Number of periods=n=?
Solution depicts the steps to calculate the life of the lease in the given case.