## TVM 15 - Present Value of an Annuity Due

## Audio Transcript

**Amazon Inc. rents a warehouse for five years with annual rent payments of $2.5 million made at the beginning of each year. If the interest rate is 8.6%, what is the present value of the rental obligations? Since the rent payments are made at the beginning of the year, this is a present value of an annuity due problem.**

**First we input the data into the relevant cells. **

**The payment, PMT, is -$2,500,000. **

**The Type is Type 1 since the payment is at the beginning of the year. **

**NPER, number of periods, is 5. The rate is 8.6%.**

**We go to the Formulas tab. We look for the PV function. **

**We click on Rate. **

**We click on NPER. **

**We click on payment, PMT. **

**And we click Type. **

**We hit OK and the PV is $10,670,924.**