Your firm is considering leasing a $50,000 copier. The copier has an estimated economic life of eight years. Suppose the appropriate discount rate is 9.3% APR with monthly compounding. Classify each lease below as a capital lease or operating lease, and explain why:
a. A four-year fair market value lease with payments of $1,145 per month.
b. A six-year fair market value lease with payments of $795 per month.
c. A five-year fair market value lease with payments of $915 per month.
d. A five-year fair market value lease with payments of $1,005 per month and an option to cancel after three years with a $9,000 cancellation penalty.