Time line of cash flow and the present value of an annuity due.
Mauer Mining Company leases a special drilling press with annual payments of $130,000.
The contract calls for rent payments at the beginning of each year for a minimum of 88 years. Mauer Mining can buy a similar drill for ?$790,000? but it will need to borrow the funds at 8?%.
Determine the present value of the lease payments at 8?%.
Should Mauer Mining lease or buy this? drill?