A car dealer leases a small computer with software for $5000 per year. As an alternative he could buy the computer for $7500 and lease the software for $3500 per year. Any time he would decide to switch to some other computer system he could cancel the software lease and sell the computer for $500. (a) If he buys the computer and leases the software, what is the payback period? (b) If he kept the computer and software for 8 years, what would be the benefit–cost ratio, based on a 5% interest rate?

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