Your firm is considering leasing a new computer. The lease lasts for 9 years. The lease calls for 10 payments of $1,000 per year with the first payment occurring immediately. The computer would cost $7,650 to buy and would be straight-line depreciated to a zero salvage value over 9 years. The actual salvage value is negligible because of technological obsolescence. The firm can borrow by issuing debt at a rate of 8%. The corporate tax rate is 30%.

This lease would be classified as a(n):

A. operating lease because there is no amortization.

B. sale and leaseback because the company gets full use of the asset.

C. operating lease because the asset will be obsolete.

D. capital lease because the lease life is greater than 75% of the economic life.

E. leveraged lease because it is being financed.