Omega Leased a Machine for a Ten-Year Non-Cancelable Term

question 211

Multiple Choice

Omega leased a machine for a ten-year non-cancelable term. At the end of the ten-year term, Omega has five consecutive one-year renewal options. A replacement machine can be acquired at the end of the term for the leased machine, but due to an expensive installation process and Omega's lease term for its store, Omega expects to lease the machine for 12 years. What is the lease term?

• A) 10 years
• B) 11 years
• C) 12 years
• D) 15 years

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Definitions:

Assembly Line

A production process that breaks down the manufacture of a good into steps that are completed in a pre-defined sequence, often on a conveyor belt, to increase efficiency.

Opportunity Cost

The neglect of possible enhancements from other avenues when one direction is pursued.

Capacity Utilization Rate

The capacity utilization rate measures the proportion of potential economic output that is actually realized, often used in manufacturing to indicate the percentage of total productive capacity being utilized.

Unemployment Rate

The quota of workers currently out of work but looking for employment opportunities actively.