On January 1, 2025, Sandhill, Inc. signs a 10-year noncancelable lease agreement to lease a storage building from Blue Warehouse Company. Collectability of the lease payments is reasonably predictable and no important uncertainties surround the costs yet to be incurred by the lessor. The following information pertains to this lease agreement:

(a) The agreement requires equal rental payments at the beginning of each year.

(b) The fair value of the building on January 1, 2025 is $6400000; however, the book value is $5350000.

(c) The building has an estimated economic life of 10 years, with no residual value. Sandhill depreciates similar buildings using the straight-line method.

(d) At the termination of the lease, the title to the building will be transferred to the lessee.

(e) Sandhills incremental borrowing rate is 11% per year. Blue Warehouse Co. set the annual rental to ensure a 10% rate of return. The implicit rate of the lessor is known by Sandhill, Inc.

(f) In addition to the payments for the use of the leased asset, the lessor also requires the lessee to pay a yearly rental payment of $15800 for executory costs related to taxes on the property.

What is the annual lease payment excluding costs?

(a) $931083

(b) $291083

(c) $962683

(d) $946883