Sizzler's Is Considering Either Purchasing or Leasing an Asset That

Sizzler's is considering either purchasing or leasing an asset that costs $28,000,has a life of 6 years,and a zero salvage value.The firm has a tax rate of 21 percent and a borrowing rate of 7 percent.The firm can lease the asset for five years with lease payments of $4,500 payable the first of each year.This lease would be classified as a(n) :

A) operating lease because the asset life is less than 10 years.
B) operating lease because there is no cost reduction.
C) leveraged lease because it is being financed with debt.
D) capital lease because the lease term is greater than 75 percent of the economic life.
E) sale and leaseback arrangement because Sizzler's obtains full use of the asset.

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