Question: Ray's incremental borrowing rate is 8.5%. Ford has a 9% incremental borrowing rate. Ray believes that the equipment has a ten-year service life but has

Ray's incremental borrowing rate is 8.5%. Ford has a 9% incremental borrowing rate. Ray believes that the equipment has a ten-year service life but has reason to suspect that a major overhaul might be required in the fifth to seventh year.Since this is the first year of the equipment's production, Ray warrants equipment for eight full years anyway.

Ford uses which one of the following interest rates to record this lease

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