(a) Initial lease liability = PV of the 5 lease payments discounted at 7%:

Liability = 25,000/1.07 + 25,000/1.07² + 25,000/1.07³ + 25,000/1.07⁴ + 25,000/1.07⁵
= 23,364.49 + 21,835.97 + 20,407.45 + 19,072.38 + 17,824.66
= $102,504.95

(b) Initial right-of-use (ROU) asset = initial lease liability (no initial direct costs, incentives, prepayments, or restoration costs to adjust for):

ROU asset = $102,504.95

Governing standard: AASB 16 Leases.