Amortization Calculation

Hi Everyone,

This is probably a dumb question but I am new to this.

How would I calculate the answer to this questions:

A $30.00 psf allowance or $300,000 based on 10,000 square feet is amortized over a 5 year lease at a discount rate of 8%, the cost per square would be $7.30 psf per annum.

I know the solution is $7.30 psf but how do I calculation amortization using a financial calculator? I have an HP12C.

Thanks in advance.

I don’t use a hand held calculator to do these calculations, but your calculator should have a function that tells you the monthly payment for a $300000 loan at 8.0% fixed rate over 60 months.

In Excel the function is PMT(rate,nper,pv,fv,type)

Rate is the interest rate charged each month, or 0.08/12 = 0.006666667 in your scenario
Nper is the number of payment periods in the loan term. Assume 60 monthly payments.
pv is the original loan amount, or, $300,000
fv is the future value of the loan after 60 payments. Since you will have this loan paid off in full, the fv = 0.
type is either 1 or 0, depending upon whether your payments are made at the beginning or at the end of the payment period. Since the first monthly loan payments is due at the end of the first month of the loan, enter 0 or leave blank.

Using these arguments for the PMT function gives me a monthly payment of $6082.92 which equates to an annual payment of about $72,995 per year. Dividing by 10000 sq ft, rounds off to $7.30 per sq ft per year.