The City of Rochester signed a 30-year agreement with East Coast Real Estate, Inc. to lease a newly-constructed building for city services. The city agrees to make an initial payment of $1,000,000 and annual payments of $809,375 for the next 29 years. Using an assumed borrowing rate of 6 percent, the present value of the lease payments is approximately $12,000,000. At the time the lease agreement is signed, the building had an appraised market value of $13 million and an estimated life of 40 years.

a-1.Should the city consider this agreement a capital lease?Yes or No

a-2.Complete the following criteria's in relation to decision making.(Do not round intermediate calculations. Round your answers to 1 decimal place.)

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