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Number 1: On January 1, 2021, A Company enters into a 4-year noncancelable lease for a machine having an estimated useful life of 5 years and a fair value of $5,000,000. The incremental borrowing rate is 8%. The company uses the straight-line method to depreciate its assets. The lease contains the following provisions: 1. Rental payments of 1,500,000 USD per year. 2. There is a guaranteed residual value of $200,000. a. Distinguish between operating lease and capital lease. b. The company should consider the lease capital or operating lease? Why? C. Determine the Assets, Liabilities, Interest payment, Principal payment, Depreciation expense, and ending liability for the first and second year. D. What is the effect of using the capital lease method (compared to operating lease) on the firm's ROE, NPM, tax, and CFI (in the early years). Explain. Number 1: On January 1, 2021, A Company enters into a 4-year noncancelable lease for a machine having an estimated useful life of 5 years and a fair value of $5,000,000. The incremental borrowing rate is 8%. The company uses the straight-line method to depreciate its assets. The lease contains the following provisions: 1. Rental payments of 1,500,000 USD per year. 2. There is a guaranteed residual value of $200,000. a. Distinguish between operating lease and capital lease. b. The company should consider the lease capital or operating lease? Why? C. Determine the Assets, Liabilities, Interest payment, Principal payment, Depreciation expense, and ending liability for the first and second year. D. What is the effect of using the capital lease method (compared to operating lease) on the firm's ROE, NPM, tax, and CFI (in the early years). Explain. Number 1: On January 1, 2021, A Company enters into a 4-year noncancelable lease for a machine having an estimated useful life of 5 years and a fair value of $5,000,000. The incremental borrowing rate is 8%. The company uses the straight-line method to depreciate its assets. The lease contains the following provisions: 1. Rental payments of 1,500,000 USD per year. 2. There is a guaranteed residual value of $200,000. a. Distinguish between operating lease and capital lease. b. The company should consider the lease capital or operating lease? Why? C. Determine the Assets, Liabilities, Interest payment, Principal payment, Depreciation expense, and ending liability for the first and second year. D. What is the effect of using the capital lease method (compared to operating lease) on the firm's ROE, NPM, tax, and CFI (in the early years). Explain. Number 1: On January 1, 2021, A Company enters into a 4-year noncancelable lease for a machine having an estimated useful life of 5 years and a fair value of $5,000,000. The incremental borrowing rate is 8%. The company uses the straight-line method to depreciate its assets. The lease contains the following provisions: 1. Rental payments of 1,500,000 USD per year. 2. There is a guaranteed residual value of $200,000. a. Distinguish between operating lease and capital lease. b. The company should consider the lease capital or operating lease? Why? C. Determine the Assets, Liabilities, Interest payment, Principal payment, Depreciation expense, and ending liability for the first and second year. D. What is the effect of using the capital lease method (compared to operating lease) on the firm's ROE, NPM, tax, and CFI (in the early years). Explain