Here are the terms of a lease agreement:

Fair value of leased asset  $150,000 

Lease term                          4 years 

Payment frequency          annual 

Payment timing            end of year 

Guaranteed residual value $30,000 

Interest rate implicit in the lease (known to lessee) 9% 

Lessee's incremental borrowing rate 7%

Required: 

a. Determine the amount of lease payment that the lessor would require to lease the asset. 

b. Compute the present value of minimum lease payments for the lessee 

c. Compute the present value of minimum lease payments for the lessor.

d. Evaluate whether the lessee should classify the lease as operating or finance.