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Lease conversion from operating to corporation

A company has borrowing cost of about 4% in 2014 and lease balance $4,300 (No work needs to be done on the chart below)

Fiscal Year	Capital Leases	Operating Lease
2014	$25	$400
2015	10	420
2016	--	380
2017	--	350
2018	--	320
Thereafter	--	3,500

Instructions (For the chart below, please show work):

[1] calculate the additional years of conversion from operating to capital. [2] calculate the payment, discount factor, PV, interest, lease obligation and lease balance. (Payment : from the operating lease table, you will have 320 up to 2028, make the adjustment on 2029 in order to have zero balance after converting to capital lease)

[3] please find the discount factor on the last 4 years. [4] provide the brief interpretation on your calculation

Year	Payment	Discount Factor	Present Value (4%)	Interest	Lease Obligation	Lease Balance
2013						$4,300
2014	400	0.9615
2015	420	0.9246
2016	380	0.8890
2017	350	0.8548
2018	320	0.8219
2019	320	0.7903
2020	320	0.7599
2021	320	0.7307
2022	320	0.7026
2023	320	0.6756
2024	320	0.6496
2025	320	0.9246
2026	320
2027	320
2028	320
2029

Answer & Explanation Solved by verified expert

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