Sage HillCompany is negotiating to lease a piece of equipment to MTBA, Inc. MTBA requests that the lease be for 9 years. The equipment has a useful life of 10 years.Sage Hillwants a guarantee that the residual value of the equipment at the end of the lease is at least $4,000. MTBA agrees to guarantee a residual value of this amount though it expects the residual value of the equipment to be only $2,500at the end of the lease term.

If the fair value of the equipment at lease commencement is $100,000, what would be the amount of the annual rental paymentsSage Hilldemands of MTBA, assuming each payment will be made at the beginning of each year andSage Hillwishes to earn a rate of return on the lease of8%?