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Khaleesi Corporation (Khaleesi) leases dragon glass] weapons to customers. She gains a loyal following of customers because dragon glass] is of limited supply but high
Khaleesi Corporation ("Khaleesi") leases dragon glass] weapons to customers. She gains a loyal following of customers because dragon glass] 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 Khaleesi was recently approached by the Lords of the North, Inc. which is interested in leasing a substantial stock of weapons over a potentially lengthy period of time. The North has indicated a willingness to pay any rate that Khaleesi Corporation demands for its dragon glass] 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 uncertainties. 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. Fair value of weapons to be leased Lease Term Useful Life of leased assets Lessee/Lessor interest rate Residual Value (guaranteed) $489,450 11 years 13 years 6% sO $489,450$489,450 11 years 13 years 11 years 13 years 896 $24,350 6% $24,350
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