An annuity may be either an "ordinary annuity" or an "annuity due." An ordinary annuity assumes that payments are made or received at the end of each period. An annuity due assumes that the payments are made or received at the beginning of each period.
The future value of an ordinary annuity would tell us how much some known amount of money added to an accumulation at the end of each period would be worth in a given number of periods. It would not be used to evaluate a lease.
An annuity is a constant stream of cash either paid or received over a period of time and at the same point in each period. If the cash is paid or received at the beginning of each period rather than at the end of each period, the annuity is an "annuity due." The present value of an annuity is the value today of payments to be received in the future. Therefore, the present value of an annuity due would be the concept most relevant to the evaluation of a lease with the first payment due on the same date the lease takes effect.
The future value of an annuity due would tell us how much some known amount of money added to an accumulation at the beginning of each period would be worth in a given number of periods. It is not used to evaluate a lease.
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