On January 1 , 2014 , Average Leasing Company entered into a direct financing lease with a lessee , Lenny Company . The lease agreement calls for five equal annual payments of $ 75, 000 at the beginning of each year with the first payment due on January 1 , 2014 . The leased property has an estimated residual value of $ 10 , 000 , which Lenny does not guarantee . The property remains the property of Average at the end of the lease term . Average desires a 12%' rate of return . Present value factors for a 12%/ interest rate are as follows : Present value of $ 1 for $1 = 1 0. 892857 Present value of $ 1 for 1 = 5 0. 567427 Present value of an ordinary annuity for ! = 5 3. 6047 70 Present value of an annuity due for 11 = 5 4. 037345 Refer to Exhibit 20 - 4 . The cost of the leased property to Average is ( round the answer to the nearest dollar ) A. $308, 475 B. $302. 801 C. $276. 032 D. $270, 358