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.