Bourne Corporation Has an Asset with a Fair Market Value

Multiple Choice

Bourne Corporation has an asset with a fair market value of $ 400,000 that it wants to lease. Frank's wants to recover its net investment in the leased asset and earn a 5% return. The asset will revert back to Frank's at the end of a 5-year lease term. If Frank's charges rent annually at the beginning of the year, what should amount should the annual rent be (rounded to whole dollars) ?

A) $ 20,000
B) $ 21,997
C) $ 87,989
D) $ 92,400