Rabbit Inc

question 15

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)$60,817
• B)$62,096
• C)$101,200
• D)$104,367

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Definitions:

Stock Appraisal Rights

Rights that allow minority shareholders to have their shares appraised and bought out by the company, typically in the event of a merger or acquisition.

Merger

The combination of two or more companies into a single entity, usually by one company acquiring the assets and businesses of the other.

Consolidation

The act of combining multiple entities, assets, or processes into a single, more effective and efficient unit.

Short-form Merger

A method of merger where a parent company merges with a subsidiary and doesn't require approval from the subsidiary's shareholders.