Pronghorn Manufacturing Ltd. has signed a lease agreement with LPN Leasing Inc. to lease some specialized manufacturing equipment. The terms of the lease are as follows:

The lease is for 5 years commencing January 1, 2020.

Pronghorn must pay LPN $59,491 on January 1 of each year, beginning in 2020.

Equipment of this type normally has an economic life of 6 years.

LPN has concluded, based on its review of Pronghorn's financial statements, that there is no unusual credit risk in this situation. LPN will not incur any further costs with regard to this lease.

LPN purchases this equipment directly from the manufacturer at a cost of $231,034, and normally sells the equipment for $275,634.

Pronghorn's borrowing rate is 7%. LPN's implied interest rate is 6%, which is known to Pronghorn at the time of negotiating the lease.

Pronghorn uses the straight-line method to depreciate similar equipment.

Both Pronghorn and LPN have calendar fiscal years (year end December 31), and follow ASPE.

From Pronghorn Manufacturing's perspective, is this a capital or operating lease?