Assume Red Corp. (a company reporting under IFRS) charges rent of $71,130 annually to Blue Corp. for the use of its asset. Red invested $600,000 in the asset that is to be leased to Blue Corp. for ten years with the annual rental due at the beginning of each year. Blue's incremental borrowing rate is 6%. Assuming there is no purchase option that is reasonably certain to be exercised by Blue Corp, what is Red's rate of implicit return on the investment?

Question 40Select one:

a.

4.0%

b.

5.5%

c.

3.22%

d.

6.0%