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Beacon Industries disclosed the following minimum rental commitments under non-cancelable operating leases in its 2017 annual report: Minimum operating lease payments Amount (in millions) 2018 $ 89 2019 58 2020 42 2021 32 2022 25 Total $246 What is the present value of these operating lease payments, assuming a 6% discount rate?

A. $246 million
B. $215 million
C. $ 70 million
D. $225 million
E. None of the above

Respuesta :

Answer:

B. $215 million 

Explanation:

The present value of the payment can be found by discounting each cash inflow by the 6% discount rate.

The present value can be found using a financial calculator:

The cash flow for year one = $89

The cash flow for year two = $58

The cash flow for year three = $42

The cash flow for year four = $32

The cash flow for year five = $25

All cash flows are in millions

I = 6%

NPV = $214.87 Million

I hope my answer helps you

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