Alexis Computer Company manufactures and sells or leases various types of computer equipment. On 1/1/17, Alexis leased a complete computer system to Edgar Enterprises. Data relating to the lease follow:

Cost of equipment to Alexis $ 80,000

Fair market value of equipment at 1/1/17 $ 98,000

Useful life of equipment 8 years

Lease term 5 years

Residual value at the end of the lease

(not guaranteed by Edgar) $ 15,000

Implicit and incremental interest rates 10%

Initial direct costs incurred in negotiation $ 1,000

Both the lessor and lessee use straight-line depreciation and have accounting periods that end on 12/31.

Required:

a. Calculate the yearly payment that Alexis will charge Edgar under this lease agreement if payments are made on 1/1 of each year, beginning 1/1/17.