Problem: Jill Norris is presently leasing a small business computer from Rice Office Equipment Company. The lease requires 10 annual payments of $2000 at the end of each year and provides the lessor9rice) with an 8% return on its investment.
(a) Assuming the computer has a ten-year life and will have no salvage value at the expiration of the lease, what was the original cost of the computer to Rice?
(b) What amount would each payment be if the ten annual payments are to be made at the beginning of each period?
You may use the following 85 interest factors:
|
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9 Periods
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10 Periods
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11 Periods
|
|
Future Value of 1
|
1.99900
|
2.15892
|
2.33164
|
|
Present Value of 1
|
.50025
|
.46319
|
.42888
|
|
Future Value of Ordinary Annuity of 1
|
12.48756
|
14.48656
|
16.64549
|
|
Present Value of Ordinary Annuity of 1
|
6.24689
|
6.71008
|
7.13896
|
|
Present Value of Annuity Due of 1
|
6.74664
|
7.24689
|
7.71008
|