On January $1,2023,$ Lenore Corporation signed a $6-$year noncancelable lease for a

machine. The terms of the lease called for Lenore to make annual payments of $$12,000$

at the beginning of each year, starting January $1,2023.$ Lenore correctly accounts for the

lease as a finance lease. The machine has an estimated useful life of $7$ years and a $$5,000$

guaranteed residual value. The machine reverts back to the lessor at the end of the lease

term. Lenore uses the straight$-$line method of depreciation for all of its plant assets.

Lenore$$s incremental borrowing rate is $7\%$ and the Lessor$$s implicit rate is known to be

$5\%.$

Required:

a$.$ Compute the present value of the minimum lease payments for Lenore $($lessee$)$

assuming that the anticipated value of the machine at the end of the lease term will be

at least $$5,000.$

b$.$ Compute the present value of the minimum lease payments for Lenore $($lessee$)$

assuming that the anticipated value of the machine at the end of the lease term will be

$$3,000.$

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