Textbook Problem

An office equipment representative has a machine for sale or lease. If you buy the machine, the cost is $7,590. If you lease the machine, you will have to sign a noncancelable lease and make 5 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:

The interest rate implicit in this lease is approximately:

1. a. 10%
2. b. 12%
3. c. between 10% and 12%
4. d. 16%