Ivanhoe Co. processes jam and sells it to the public. Ivanhoe leases equipment used in its production processes from Metlock, Inc. This year, Ivanhoe leases a new piece of equipment from Metlock. The lease term is 5 years and requires equal rental payments of $12,000 at the beginning of each year. In addition, there is a renewal option to allow Ivanhoe to keep the equipment one extra year for a payment at the end of the fifth year of $13,000 (which Ivanhoe is reasonably certain it will exercise). The equipment has a fair value at the commencement of the lease of $63,295 and an estimated useful life of 7 years. Metlock set the annual rental to earn a rate of return of 6%, and this fact is known to Ivanhoe. The lease does not transfer title, does not contain a bargain purchase option, and the equipment is not of a specialized nature. Click here to view factor tables. How should Ivanhoe classify this lease?

Ivanhoe should classify the lease as a/an select a type of lease operating/finance lease.