Kachelmeyer, Inc., signs an agreement on 1 January 2005, to lease equipment from Henderson Company. The term of the lease is five years, and the estimated economic life of the asset is also five years. The agreement requires equal annual payments of $ 36285.90, with the first payment on 1 January 2005. Kachelmeyer’ s incremental borrowing rate is 12 percent. Henderson’ s implicit rate is 10 percent and is known to Kachelmeyer. The prime rate is 8 percent. The discount rate that Kachelmeyer should use to capitalize the lease is:
A．
| A. 8%. |
B．
| B. 12%. |
C．
| C. 10%. |
参考答案：C
解析：The lower of the lessee’ s incremental borrowing rate or the lessor’ s implicit rate, if know to the lessee is used as the discount rate. Hence, 10 percent is the correct answer. The prime rate is inconsequential for this problem.