Rabbit Inc

Multiple Choice

Rabbit Inc. has an asset with a fair market value of $ 450,000 that it wants to lease. Rabbit's wants to recover its net investment in the leased asset and earn an 8%. The asset will revert back to Rabbit's at the end of a 5-year lease term and it is expected that the residual value of the asset will be $ 20,000 at the end of the lease. If Rabbit wants to charge rent semi-annually starting at the beginning of the lease, what amount should the lease payments be (rounded to whole dollars) ?

A) $ 51,745
B) $ 62,096
C) $ 101,200
D) $ 104,367