Present Value of an Ordinary Annuity Due

question 17

Essay

Present value of an ordinary annuity due.
Jill Morris is presently leasing a small business computer from Eller Office Equipment Company. The lease requires 10 annual payments of $5,000 at the end of each year and provides the lessor (Eller) with an 8% return on its investment. You may use the following 8% interest factors:
Instructions
(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 Eller?
(b) 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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Definitions:

Self-Actualization

The embodiment or reaching of an individual's innate talents and potential, considered an innate longing or necessity in every person.

Unique Potential

An individual's inherent capacities and abilities that distinguish them from others.

Needs Hierarchy

A psychological theory proposing that human needs are arranged in a hierarchical order, with physical needs at the base and self-actualization needs at the top.

Social Animal

An organism that highly engages in social behaviors and interactions, relying on group cooperation for survival and well-being.