a.?The cost of the machine at the beginning of the lease is the present value of the lease payments discounted at the interest rate the lessor would charge.  The $900 annual lease payment is an annuity.  The present value factor for an annuity of 10 periods at a discount rate of 12% in Table 6-5 is 5.6502.  Thus, the present value of the lease payments is:

$900 * 5.6502 =$5,085