A firm has agreed to lease some equipment. Terms of the lease require the firm to pay
the lessor $175,000 per year for the next seven years.
a. What is an annuity? Distinguish between an ordinary annuity and an annuity due.
Do the cash flows described above represent an annuity?
b. Compute the present value of the lease payments at 8% assuming that payments
are made at the end of each year.
c. Compute the present value of the lease payments at 8% assuming that payments
are made at the beginning of each year.