Given an annual lease payment of $438,020, find the rate of return ear

QUESTION

Given an annual lease payment of $438,020, find the rate of return earned by a lessor on a 3 year, $1 million (present value) capital lease.
We need to calculate the internal rate of return. In a financial calculator, it can be done as follows; CF0 = -1,000,000 CF1 = 438,020 N1 = 3 Calculate IRR = 15.0059% Alternatively, wed need to calculate the rate at which the present value of all future payments equals the 1,000,000 lease. 1,000,000 = 438,020*(1 R)^(-1) 438,020*(1 R)^(-2) 438,020*(1 R)^(-3) This

is very complicated and I dont remember how to solve it, but generally the financial calculator or a spreadsheet program with an IRR function is the best way to do it. You can check the work by plugging in the rate into the equation, however.

ANSWER:

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