Harbord Cruise Lines is about to add a new fleet of cruise ships. It will lease the ships, paying $50 million at the end of each year for the next 10 years. These lease payments correspond to an annual interest rate of 4% (according to Equation 24.1). How will the lease affect Harbord’s EBIT and net income in the first year if the lease is classified as

(a) an operating lease, or

(b) a finance lease? How would each lease appear on Harbord’s balance sheet? Assume Harbord’s corporate tax rate is 20%.