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What total interest expense will Ajax incur

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Question - Ajax Company leases a factory building, specifically built to their specifications, for $1,200,000 per year. At the end of the 20-year lease, Ajax can exercise a "bargain purchase" payment of $2,000,000 and purchase the factory building -- it is likely that Ajax will exercise the option. The lease has an intrinsic interest rate of 3 percent. During the first and second years of the lease, what total interest expense will Ajax incur because of the lease?

A) $1,038,568

B) $548,878

C) $1,078,222

D) $529,344

Reference no: EM132964702

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