Bourne Corporation Has an Asset with a Fair Market Value

question 22

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

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Definitions:

Benefit Them

To have a positive effect on someone or provide them with an advantage.

Desire

A strong feeling of wanting to have something or wishing for something to happen.

Generalization

The process or method of formulating general concepts by abstracting common properties of specific instances.

Specific Conclusion

A definite and detailed end statement in an argument or presentation, drawn from the information and analysis provided beforehand.