The Old School is trying to decide whether they should

The Old School is trying to decide whether they should purchase or lease a new high-speed photocopier machine. It will cost the school $ 14,000 to purchase the copier and $ 750 each year to maintain the machine over the course of its six- year useful life. At the end of the sixth year, Old School expects to be able to sell the copier for $ 1,000. A dealer has offered to lease the school the same copier for a payment of $ 750 at the beginning of the lease plus lease payments of $ 3,450 per year for four years. Lease payments include all maintenance. The dealer was unable to offer a lease longer than four years. Lease payments would be made at the end of each year. If the Old School’s discount rate is 8 percent which alternative should it choose and why?
A. Solve using a spreadsheet program such as Excel.
B. Solve using a financial calculator (optional).

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Discount Rate
Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal...


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