Answer:
4) $120,781
Explanation:
You can calculate the present value of the rental payments in two different ways:
1) multiply the value of the annuity times the present value of the annuity for 10 years = $18,000 x 6.71008 = $120,781
2) or you can divide calculate the present value of every annuity and then add them up
present value = ($18,000 / 1.08) + ($18,000 / 1.08²) + ($18,000 / 1.08³) + ($18,000 / 1.08⁴) + ($18,000 / 1.08⁵) + ($18,000 / 1.08⁶) + ($18,000 / 1.08⁷) + ($18,000 / 1.08⁸) + ($18,000 / 1.08⁹) + ($18,000 / 1.08¹⁰) = $16,667 + $15,432 + $14,289 + $13,321 + $12,250 + $11,343 + $10,503 + $9,723 + $9,004 + $8,337 = $120,781
