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calculating IRR for leases

Hi all. I am struggling to finish the course.Got a lot to cover. Hows everyone doing?
Can someone please teach me how to calculate the IRR using a financial calculator(BAIIPlus) for the calculation presented in page 98 of the CFAI FRA.
Thanks in advance

It's not too bad...just remember to make your initial CF0 entry negative and your subsequent CFi entries positive.

MLP = Minimum Lease Payment

CF0 = -PV(MLP)
CFi = MLPi
Fi = 1 (this is actually frequency, but to make your life easy, just always enter 1)

CF0 entry should be - [PV(Minimum Lease Payments)] which is given. So you enter -12,208
CF1 entry should be +1683 (corresponding to 2009 in the question - your first payment)
CF2 entry should be +1693 (2010)
And so on...
When you get to "Thereafter" the question says this amount is split each year from 2014 to 2019 at 1586, and then 454 in 2020. So if I were you, write all these out, and enter them like you did for the others.

Once you enter them all ...

Click IRR and CPT. It should give you the %. If it says Error 5, its cause you didnt make CF0 negative. Also, as you enter each number, make sure you press "ENTER" at the top of your calc. then it is stored.

If you make a mistake or want to start over, press "2ND" and then "CE|C" (bottom left corner)

Once you get it down, then you can make it easier by using frequency...

GL!

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Thank you..so tensed i totally forgot abt the IRR button on my calculator!!hehe...i still havent finished the course yet or had a look at any EOC..lord save me!

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We need to know how to calc the IRR of leases?

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only instance i can think of is if they ask us to classify operating lease to finance lease without giving us the implicit rate. so they might ask what is the implicit rate in the lease (which we answer using method above)

and then might ask what is interest expense for year x, or ending lease liability for year x ...both of which require the implicit rate i believe

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