A car dealer leases a small computer with software for $5000 per year. As an alternative he could buy the computer for $7000 and lease the software for $3500 per year. Anytime he would decide to switch to some other computer system he could cancel the software lease and
sell the computer for $500. If he buys the computer and leases the software,
a) What is the payback period?
b) If he kept the computer and software for 6 years, what would be the benefit-cost ratio, based on a 10% interest rate?