Jack Sawyer is presently leasing a copier from John Office Equipment
Company. The lease requires 11 annual payments of $2,500 at the end of
each year and provides the lesser (John) with an 8% return on its
investment. You may use the following 8% interest factors:
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
a) Assume the computer has an eleven-year life and will have no salvage
value at the expiration of the lease, what was the original cost of the
copier to John?
b) What amount would each payment be if the 11 annual payments are to be made at the beginning of each period?
Click here for the solution: Rye Company was formed on December 1, 2010
