Assume Red Corp

Multiple Choice

Assume Red Corp. (a company reporting under IFRS) wants to earn an 4% return on its investment of $ 600,000 in an asset that is to be leased to Blue Corp. for ten years with an annual rental due in advance each year. How much should Red charge for annual rental assuming there is no purchase option that is reasonably certain to be exercised by Blue Corp.?

A) $ 172,073
B) $ 71,130
C) $ 73,974
D) $ 189,274