Laurel Inc. entered into a 5-year lease agreement of equipment requiring $10,000 annual payments, with the first payment due immediately. The lease does not contain a renewal or purchase option, and the asset reverts to the lessor at the end of the five-year period with no guaranteed residual. The lessee's incremental borrowing rate is 7% and the implicit rate of the lease is 8%, known by the lessee. Just prior to the lease commencement, the lessee (a) incurred legal fees to execute the lease of $700, (b) received $3,500 from the lessor as a lease incentive to sign the new lease, and (c) made the first annual payment of $10,000. What is the amount of the lease liability recognized by Laurel Inc. at the commencement of the lease? A. $28,566 B. $35,771 C. $33,121 D. $40,321