A car dealer leases a small computer with software for $5000 per year. As an alternative be could buy the computer for $7000and lease the software for $3500 per year. Any time he would decide to switch to some other computer system he could cancel the software lease and sell the computer for $500.
a) If he buys the computer and leases the software 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 an 8% interest rate?