Smith leased a machine and appropriately accounted for lease as a long-term finance lease. The lease contains a bargain purchase option of $40,000 that is exercisable at the end of the ten-year lease term. Smith's annual lease payment be of $500,000. Smith's first lease payment is due upon the inception of the lease. Smith used an interest rate of 5% relating to this lease. What amount will Smith record as a lease liability at the inception of the lease?

a. 3,910,867

b.$4,078,467

c. $3,885,424

d. $4,118,467

e.$4,084,607