In: Finance
The Ellis Corporation has heavy lease commitments. Prior to
SFAS No. 13, it merely footnoted lease obligations in the
balance sheet, which appeared as follows: Use Appendix D for an
approximate answer but calculate your final answer using the
formula and financial calculator methods.
In $ millions | In $ millions | ||||
Current assets | $ | 90 | Current liabilities | $ | 30 |
Fixed assets | 90 | Long-term liabilities | 55 | ||
Total liabilities | $ | 85 | |||
Stockholders' equity | 95 | ||||
Total assets | $ | 180 | Total liabilities and stockholders' equity | $ | 180 |
The footnotes stated that the company had $28 million in annual
capital lease obligations for the next 15 years.
a. Discount these annual lease obligations back to
the present at a 10 percent discount rate. (Do not round
intermediate calculations. Round your answer to the nearest
million. Input your answer in millions of dollars (e.g., $6,100,000
should be input as "6").)
b. Construct a revised balance sheet that includes
lease obligations. (Do not round intermediate calculations.
Round your answers to the nearest million. Input your answer in
millions of dollars (e.g., $6,100,000 should be input as
"6").)
c. Compute the total debt to total asset ratio for
the original and revised balance sheets. (Input your
answers as a percent rounded to 2 decimal places.)
d. Compute the total debt to total equity ratio
for the original and revised balance sheets. (Input your
answers as a percent rounded to 2 decimal places.)