Consider the case where this year you will begin a seven$-$year lease for a stallion that has a market value of $$280,000$ and has an expected useful life of $7$ years with no expected salvage value $($so while there is no buyout option, the lease DOES exhaust the horse's value as a financial asset$).$ Seven lease payments of $$46,393$ are due to be paid with the first payment made when the horse is acquired and the remainder due annually thereafter. Demonstrate how this asset would be reflected on the lessee firm's financial statements at the end of $2023$ as if it were considered to be $($a$)$ an operating lease or $($b$)$ a capital lease. $(8$ points$)$

The owner of an industrial hemp processing system $($initial value $$7\mathrm{.}0$ million, economic life $15$ years$)$ considers leasing it to a startup under a $12-$year contract at $$780,000/$ year. The estimated value of the machinery at the end of the lease is $15\%$ of its initial value. The owner faces a $30\%$ marginal tax rate on ordinary income, a $5\%$ cost of debt capital, and $8\mathrm{.}5\%$ cost of equity capital. The hemp processing system will be acquired using $80\%$ external financing with the remainder being the owner's equity. For tax purposes the owner uses sEven$-$year MACRS $150\%$ depreciation with half$-$year convention $($use the standard IRS depreciation table$).$ Calculate the present$-$valued profitability of this lease for the lessor.