This question is based on TVM question 2 (see next page). The point is to convince you that at 12 percent discount rate, it would make more sense to buy than to lease. Suppose we decide the buy the equipment (not lease) for $15,192, not including interest of 12 percent. The down payment is $4,000. The remaining 4 payments are paid off as an ordinary annuity mortgage. 1. What are the annual end-of-year payments? 2. What are the total undiscounted payments? 3. How much interest expense is recorded for year 1? 4. Compare the total undiscounted lease payments of $20,000 to the total undiscounted payments you calculated above. 5. Does it make more sense to lease (based on 5 payments of $4,000) or to buy based on the terms of $15,192, 12 percent interest? [2] Stone Co. is considering the acquisition of equipment. To buy the equipment, the cost is $15,192. To lease the equipment, Stone must sign a noncancelable lease and make five payments of $4,000 each. The first payment will be paid on the first day of the lease. At the time of the last payment, Stone will receive title to the equipment. The present value of an ordinary annuity of $1 is as follows: Present Value No. of Periods 10% 12% 16% 0.909 0.893 0.862 1.736 1.690 1.605 2.487 2402 2.246 3.170 3.037 2.798 3.791 3.605 3.274 The interest rate implicit in this lease is approximately A. 10% B. 12% C. Between 10% and 12% D. 16%