Lease-A-Rama Co. leases equipment to Dunlavy Co. over a lease term of 5 years, with equal annual payments starting the first day of the lease. The fair value of the equipment is $500,000 and the expected residual value at the end of the lease term is $50,000. Lease-A-Rama expects a 12% return on investment as a result of the lease. What is the amount of the equal lease payments Dunlavy will make, and at what amount will Lease-A-Rama record its gross investment in the leaseAdditional information: Present value of an annuity due of $1 for 5 periods at 12% 4.04 Present value of $1 in four periods at 12% 0.64 Present value of $1 in five periods at 12% 0.57 Lease Payment Amount Gross Investment in Leasea. $ 116,710 $ 500,000 b. $ 115,842 $ 518,000 c. $ 116,710 $ 633,550 d. $ 115,842 $ 500,000 (A) Option a (B) Option b (C) Option c (D) Option d
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