Patriots Inc. is interested in leasing a new air compressor from Krafts Athletic Shop. The new 2015 model is selling for $99,900. Patriots can lease the machine for 7 years, with annual payments of $15,300. The machine has a useful life of 9 years. If Patriots Inc. borrows money they pay 3.5 percent interest.

Question: There are 4 criteria that determine whether a lease is treated as a capital lease. Based on the percentage of the assets useful life criteria , would the lease be classified as an operating lease or capital lease? (Show all work)