Car Dealer Presently Leases Small

A car dealer presently leases a small computer with software for $5000 per year. As an alternative he could purchase the computer for $7000 and lease the software for $3500 per year. Any time he would decide to switch to some other computer system he could cancel the software lease and sell the computer for $500. If he purchases the computer and leases the software,

(a) What is the payback period?

(b) If he kept the computer and software for 6 years, what would be the benefit-cost ratio, based on a 10% interest rate?

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