TCO E) Jack Sawyer is presently leasing a copier from John Office Equipment Comp
ID: 2458359 • Letter: T
Question
TCO E) 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 leaser (John) with an 8% return on its investment. You may use the following 8% interest factors. 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 12.48756 14.48656 Ordinary Annuity of 1 Present Value of 6.24689 6.71008 7.13896 Ordinary Annuity of 1 Present Value of 6.74664 7.24689 7.71008 Annuity Due of 1 (a) Assuming the computer has an 11-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?
Explanation / Answer
a) Original cost of the copier = Annuity amount * PVIFA
= $2500*7.139
= $17847.5
b) Payment if 11 annual payments are to be made at the beginning of each period = Cost / [1+PVIFA(8,10)]
= $17847.5/(1+6.7101)
= $17847.5/7.7101
= $2314.82
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.