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Pita Pub leased a specialty machine for a five-year non-cancelable term. At the end of the five-year term, Pita Pub has four consecutive one-year renewal options. A replacement machine can be acquired, but due to an expensive installation process and Pita Pub’s lease term for its mall location, Pita Pub expects to lease the machine for seven years. What is the lease term?

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Answer: 7 years

Explanation:

A lease is an agreement between parties for the use of an asset by one of the parties whilst paying the other party for the usage. The party leasing is known as the lessor and the party being leased to is the Lessee.

The lease term in this scenario consists of the original non-cancelable 5 years and then an additional 2 year consecutive renewal which Pita Pub is entitled to and wants to exercise due to high installation costs and the lease term for their location. So that brings the total to 7 years.

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