1. Belize Mills Limited enters into an agreement with Medina's Rental Co. on January 1, 2021 for the purpose of leasing a machine to be used in its manufacturing operations. The following data pertain to the agreement: (a) The term of the noncancelable lease is 3 years with no renewal option. Payments of $574,864 are due on January 1 of each year. (b) The fair value of the machine on January 1, 2021, is $1,600,000. The machine has a remaining economic life of 10 years, with no salvage value. The machine reverts to the lessor upon the termination of the lease. (c) Alaska depreciates all machinery it owns on a straight-line basis. (d) Alaska's incremental borrowing rate is 10% per year. Belize Mills does not have knowledge of the 8% implicit rate used by Medina's. (e) Immediately after signing the lease, Medina's finds out that Belize Mills is the defendant in a suit which is sufficiently material to make collectability of future lease payments doubtful. From the viewpoint of Duke, what type of lease agreement exists? a. Operating lease b. Finance lease c. Sales-type lease d. Direct-financing lease