Belfor Manufacturing Limited Has $878 010 in Total Assets, $272

Multiple Choice

Belfor Manufacturing Limited has $878 010 in total assets, $272 555 in equity and $605 455 inliabilities. The company is considering a lease with $40 776 in annual lease payments for 6 years.The first lease payment is due upon signing the lease contract. The company's tax rate is 33% and its borrowing rate is 6%. The lessor's implied discount rate is 6.85%, the cost of the asset is $238 926 and the asset's economic life is estimated at 8 years. Which of the following statements about Belfor's considered lease is correct?

A) On the day the lease is signed, the capitalized value of the lease would be $222 202 after rounding.
B) The lease should not be capitalized since the term of the lease is only 67% of the asset's economic life
C) The contract would be considered a conditional sales arrangement since the economic life of the asset is longer than the term of the lease.
D) This lease would not be considered a financial (capital) lease since the present value of the lease is less than 90% of the asset's fair market value.