Your firm is considering leasing a $51,000 copier. The copier has an estimated economic life of eight years. Suppose the appropriate discount rate is 8.7% APR with monthly compounding.

Classify each lease below as a capital lease or operating lease, and explain why:

a. A four-year fair market value lease with payments of $1,160 per month.

b. A six-year fair market value lease with payments of $800 per month.

c. A five-year fair market value lease with payments of $925 per month.

d. A five-year fair market value lease with payments of $990 per month and an option to cancel after three years with a $8,700 cancellation penalty.