You small business is thinking about renting office equipment (computers, printers, photocopiers, etc) instead of buying them. You are offered a 5-year lease, here are the details. Equipement value: $45,000 An initial $5,000 deposit is required (or downpayment at the time oyou sign the contract) Monthly beginning of period rental payment of $800

The equipement has a residual value after 5 years (end of period) of $8,000. You could decide to purchase it at for this amount or the lessor will sell it to another party for the same amount.

A- Calculate the rate of return (effective annual) for the lessor (hint, you know PV, N, FV and PMT) and consider that the rate is compounded monthly B- Considering your required return on equity is estimated at 18(1)% per yer, the calculated return for the lessor and a taxation rate of 22%, calculate WAAC.