Khaleesi Corporation leases dragonelass weapons to customers

Khaleesi Corporation leases dragonelass weapons to customers. She gains a loyal following of customers because dragonglass is of limited supply but high demand due to its usefulness for the upcoming winter. Further, Khaleesi tends to offer more favorable financing terms than competitors offering substitutive products (e.g., Lannister, LLC) Khaleesi was recently approached by the Lords of the North, Inc. (the North\") which is interested in leasing a substantial stock of weapons over a potentially lengthy geriod.of time. The North has indicated a willingness to pay any rate that Khaleesi Corporation demands for its dragcaglass products, but generally receives an interest rate of 12% on all other borrowing transactions. The North\'s management are a very noble group, so payments are reasonably assured. Further, there are no material cost ncertainties. Khaleesi has gathered its council to discuss entering into such a contract with the North and has invited you to provide financial council. Khaleesi\'s board has proposed several alternative sets of lease terms (below) and would like you determine what the North\'s annual payments will be under each scenario, if payments are made at the beginning of the period $489,450 Fair value of weapons to be leased Lease Ternm Useful Life of leased assets Lessee/Lessor interest rate Residual Value (guaranteed) 1. On the first tab of your Excel workbook, prepare a schedule for Khaleesi which uses Excel to $489,450 11 years 13 years 696 So $489,450 11 years 13 years 6% $24,350 years 13 years 896 $24,350 compute the North\'s necessary annual payment under each of the scenarios listed in the chart above. The schedule should list for each scenario above the desired present value of lease payments, future value of the leased asset, the lease term, and the interest rate and utilize an Excel formola to compute a payment (Hint: -PMT). Khaleesi is a high paying client of your firm, so the schedule should be extremely organized and professional looking (s.e, include a title, date, description in the top left-hand corner and utilize borders, font effects, etc. in cells to make the worksheet look visually appealing). On the second tab of the Excel workbook, prepare a lease amortization schedule describing the pattern of payments and interest over the lease term for both Khaleesi and the North. On the third tab of the Excel workbook, prepare the appropriate entries for both Khaleesi and the North on 1/1/18. Numbers in journal entries should be linked to the table prepared in number 3 above or computed using Excel formulas. On the fourth tab of the Excel workbook, prepare the appropriate entries for both Khaleesi and the North through 1/1/21. Numbers in journal entries should be linked to the table prepared in number 3 above or computed using Excel formulas 2. 3. 4. 5. On the fifth tab, prepare the appropriate entries for both Khaleesi and the North on 12/31/2028. Assume the weapons returned to Khaleesi have an actual residual value of $500 (remember, Khaleesi guaranteed a residual value of $24,350).

Solution

UPLOAD OF EXCEL SHEET NOT POSSIBLE SO i AM PASTING THE SOLUTION

NECESSARY ANNUAL PAYMENT

OPTION

A

B

C

FAIR VALUE

4,89,450.00

4,89,450.00

4,89,450.00

RESIDUAL VALUE

                    -  

     24,350.00

     24,350.00

INTEREST RATE

6

6

8

LEASE TERM

11

11

11

USEFUL LIFE

13

13

13

ANNUITY FACTOR R%, 11 YEARS

           7.8869

           7.8869

           7.1390

ANNUAL LEASE PAYMENT

     62,058.60

     58,971.21

     65,149.18

LEASE AMORTIZATION SCHEDULE

OPTION

A

YEAR

OPENING

INTERST

PRINCIPAL

LEASE PAY

CLOSING

1

4,89,450.00

29367

32,691.60

62,058.60

4,56,758.40

2

4,56,758.40

27405.5

34,653.10

62,058.60

4,22,105.30

3

4,22,105.30

25326.32

36,732.28

62,058.60

3,85,373.02

4

3,85,373.02

23122.38

38,936.22

62,058.60

3,46,436.80

5

3,46,436.80

20786.21

41,272.39

62,058.60

3,05,164.41

6

3,05,164.41

18309.86

43,748.74

62,058.60

2,61,415.67

7

2,61,415.67

15684.94

46,373.66

62,058.60

2,15,042.01

8

2,15,042.01

12902.52

49,156.08

62,058.60

1,65,885.93

9

1,65,885.93

9953.156

52,105.44

62,058.60

1,13,780.49

10

1,13,780.49

6826.829

55,231.77

62,058.60

     58,548.72

11

     58,548.72

3512.923

58,545.68

62,058.60

                3.04

.

OPTION

B

YEAR

OPENING

INTERST

PRINCIPAL

LEASE PAY

CLOSING

1

4,89,450.00

29367

29,604.21

58,971.21

4,59,845.79

2

4,59,845.79

27590.75

31,380.46

58,971.21

4,28,465.33

3

4,28,465.33

25707.92

33,263.29

58,971.21

3,95,202.04

4

3,95,202.04

23712.12

35,259.09

58,971.21

3,59,942.95

5

3,59,942.95

21596.58

37,374.63

58,971.21

3,22,568.32

6

3,22,568.32

19354.1

39,617.11

58,971.21

2,82,951.21

7

2,82,951.21

16977.07

41,994.14

58,971.21

2,40,957.07

8

2,40,957.07

14457.42

44,513.79

58,971.21

1,96,443.29

9

1,96,443.29

11786.6

47,184.61

58,971.21

1,49,258.68

10

1,49,258.68

8955.521

50,015.69

58,971.21

     99,242.99

11

     99,242.99

5954.579

53,016.63

58,971.21

     46,226.36

.

OPTION

C

YEAR

OPENING

INTERST

PRINCIPAL

LEASE PAY

CLOSING

1

4,89,450.00

39156

25,993.18

65,149.18

4,63,456.82

2

4,63,456.82

37076.55

28,072.63

65,149.18

4,35,384.18

3

4,35,384.18

34830.73

30,318.45

65,149.18

4,05,065.74

4

4,05,065.74

32405.26

32,743.92

65,149.18

3,72,321.82

5

3,72,321.82

29785.75

35,363.43

65,149.18

3,36,958.38

6

3,36,958.38

26956.67

38,192.51

65,149.18

2,98,765.88

7

2,98,765.88

23901.27

41,247.91

65,149.18

2,57,517.97

8

2,57,517.97

20601.44

44,547.74

65,149.18

2,12,970.22

9

2,12,970.22

17037.62

48,111.56

65,149.18

1,64,858.66

10

1,64,858.66

13188.69

51,960.49

65,149.18

1,12,898.17

11

1,12,898.17

9031.854

56,117.33

65,149.18

     56,780.85

NECESSARY ANNUAL PAYMENT
OPTION	A	B	C
FAIR VALUE	4,89,450.00	4,89,450.00	4,89,450.00
RESIDUAL VALUE	-	24,350.00	24,350.00
INTEREST RATE	6	6	8
LEASE TERM	11	11	11
USEFUL LIFE	13	13	13
ANNUITY FACTOR R%, 11 YEARS	7.8869	7.8869	7.1390
ANNUAL LEASE PAYMENT	62,058.60	58,971.21	65,149.18
	LEASE AMORTIZATION SCHEDULE
OPTION	A
YEAR	OPENING	INTERST	PRINCIPAL	LEASE PAY	CLOSING
1	4,89,450.00	29367	32,691.60	62,058.60	4,56,758.40
2	4,56,758.40	27405.5	34,653.10	62,058.60	4,22,105.30
3	4,22,105.30	25326.32	36,732.28	62,058.60	3,85,373.02
4	3,85,373.02	23122.38	38,936.22	62,058.60	3,46,436.80
5	3,46,436.80	20786.21	41,272.39	62,058.60	3,05,164.41
6	3,05,164.41	18309.86	43,748.74	62,058.60	2,61,415.67
7	2,61,415.67	15684.94	46,373.66	62,058.60	2,15,042.01
8	2,15,042.01	12902.52	49,156.08	62,058.60	1,65,885.93
9	1,65,885.93	9953.156	52,105.44	62,058.60	1,13,780.49
10	1,13,780.49	6826.829	55,231.77	62,058.60	58,548.72
11	58,548.72	3512.923	58,545.68	62,058.60	3.04
.
OPTION	B
YEAR	OPENING	INTERST	PRINCIPAL	LEASE PAY	CLOSING
1	4,89,450.00	29367	29,604.21	58,971.21	4,59,845.79
2	4,59,845.79	27590.75	31,380.46	58,971.21	4,28,465.33
3	4,28,465.33	25707.92	33,263.29	58,971.21	3,95,202.04
4	3,95,202.04	23712.12	35,259.09	58,971.21	3,59,942.95
5	3,59,942.95	21596.58	37,374.63	58,971.21	3,22,568.32
6	3,22,568.32	19354.1	39,617.11	58,971.21	2,82,951.21
7	2,82,951.21	16977.07	41,994.14	58,971.21	2,40,957.07
8	2,40,957.07	14457.42	44,513.79	58,971.21	1,96,443.29
9	1,96,443.29	11786.6	47,184.61	58,971.21	1,49,258.68
10	1,49,258.68	8955.521	50,015.69	58,971.21	99,242.99
11	99,242.99	5954.579	53,016.63	58,971.21	46,226.36
.
OPTION	C
YEAR	OPENING	INTERST	PRINCIPAL	LEASE PAY	CLOSING
1	4,89,450.00	39156	25,993.18	65,149.18	4,63,456.82
2	4,63,456.82	37076.55	28,072.63	65,149.18	4,35,384.18
3	4,35,384.18	34830.73	30,318.45	65,149.18	4,05,065.74
4	4,05,065.74	32405.26	32,743.92	65,149.18	3,72,321.82
5	3,72,321.82	29785.75	35,363.43	65,149.18	3,36,958.38
6	3,36,958.38	26956.67	38,192.51	65,149.18	2,98,765.88
7	2,98,765.88	23901.27	41,247.91	65,149.18	2,57,517.97
8	2,57,517.97	20601.44	44,547.74	65,149.18	2,12,970.22
9	2,12,970.22	17037.62	48,111.56	65,149.18	1,64,858.66
10	1,64,858.66	13188.69	51,960.49	65,149.18	1,12,898.17
11	1,12,898.17	9031.854	56,117.33	65,149.18	56,780.85