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What was the original cost of the computer to stark

Problem: Norris is presently leasing a small business computer from Stark office equipment co. the lease requires 10 annual payments of $3,500 at the end of each year and provides the lessor (stark) with an 8% return on its investment. You may use the following 8% interest factor:

9 periods 10 periods 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

Instructions:

Q1. 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 Stark?

Q2. What amount would each payment be if the ten annual payments are to be made at the beginning of each period?

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