An office equipment representative has a machine for sale or lease. If you buy the machine, the cost is $7,596. If you lease the machine, you will have to sign a noncancelable lease and make five payments of $2,000 each. The first payment will be paid on the first day of the lease. At the time of the last payment you will receive title to the machine. The present value of an ordinary annuity of $1 is as follows:                                                                                                                

       

 

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Present Value of $1 Discounted at Number of Periods 10% 12% 16% 0.862 1.605 0.909 0.893 1.736 1.690 2.487 2.402 2.246 4 3.170 3.037 2.798 5 3.791 3.605 3.274 The interest rate implicit in this lease is approxi- mately: c. between 10% and 12% a. 10% b. 12% d. 16% 23 Present Value of $1 Discounted at Number of Periods 10% 12% 16% 0.862 1.605 0.909 0.893 1.736 1.690 2.487 2.402 2.246 4 3.170 3.037 2.798 5 3.791 3.605 3.274 The interest rate implicit in this lease is approxi- mately: c. between 10% and 12% a. 10% b. 12% d. 16% 23

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