1. On January 1, 2022, Lenore Corporation signed a 5-year noncancelable lease for a machine. The terms of the lease called for Lenore to make annual payments of $10,000 at the beginning of each year, starting January 1, 2022. Lenore correctly accounts for the lease as a finance lease. The machine has an estimated useful life of 6 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. Lenores incremental borrowing rate is 8% and the Lessors implicit rate is known to be 6%.

Required:

1. 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.
2. 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.