Lease Discount Rate Calculator

Formula

The formula to calculate the lease discount rate is:

\[ DR = \frac{FV - PV}{FV \times n} \]

Where:

DR is the lease discount rate (decimal)
FV is the future value of the lease payments ($)
PV is the present value of the lease payments ($)
n is the total number of lease payments

What is a Lease Discount Rate?

A lease discount rate, also known as the lease interest rate, is the interest rate used in the financial calculations to determine the present value of a lease. It is used to discount future cash flows from a lease to their present value, which is the amount that the lessee would need to invest currently to cover the lease payments in the future. This rate is often determined by the lessee’s incremental borrowing rate or the rate implicit in the lease.

Example Calculation

Example 1:

Future Value of Lease Payments (FV): $10,000
Present Value of Lease Payments (PV): $8,000
Total Number of Lease Payments (n): 5

Step 1: Calculate the lease discount rate:

\[ DR = \frac{10000 - 8000}{10000 \times 5} = \frac{2000}{50000} = 0.04 \]

Example 2:

Future Value of Lease Payments (FV): $15,000
Present Value of Lease Payments (PV): $12,000
Total Number of Lease Payments (n): 10

Step 1: Calculate the lease discount rate:

\[ DR = \frac{15000 - 12000}{15000 \times 10} = \frac{3000}{150000} = 0.02 \]