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On December 31, 2016, Larkspur Corporation signed a 5-year, non-cancelable lease for a machine. The terms of the lease called for Larkspur to make annual payments of $9,399 at the beginning of each year, starting December 31, 2016. The machine has an estimated useful life of 6 years and a $4,700 unguaranteed residual value. The machine reverts back to the lessor at the end of the lease term. Larkspur uses the straight-line method of depreciation for all of its plant assets. Larkspurs incremental borrowing rate is 6%, and the lessors implicit rate is unknown. 1. What type of lease is this

2. Compute the present value of the lease payments.