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A company leases the following asset:
Fair value of $200,000.
Useful life of 5 years with no salvage value.
Lease term is 4 years. It is noncancellable.
Annual lease payment is $30,000 and the lease rate is 11%.
The companys overall borrowing rate is 9.5%.
The firm can purchase the equipment at the end of the lease period for $45,000.
What type of lease is this?
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