Liberty University-Portal ×VTutor.com Learning Suite xy M Homework 7 -) Liezto.m

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Liberty University-Portal ×VTutor.com Learning Suite xy M Homework 7 -) Liezto.mheducation.com/hm.tpx Homework 7 instructions I help Question 24 (of 25) Save &Exit; Submit 24 value 4.00 points 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 Fixed assets 60 Current liabilities 60 Long-term liabilities S 20 30 Total liabilities Stockholders' equity $ 50 70 Total liabilities and Total assets $ 120 stockholders' equity 120 The footnotes stated that the company had $12 million in annual capital lease obligations for the next 20 years a. Discount these annual lease obligations back to the present at a 8 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").) PV of lease obligations million 11:55 AM 12/9/2015

Explanation / Answer

Answer-a Lease obligation = $12,000,000 Number of years = 20 years Discount rate = 8% Present value of Lease = $117,817,768.89 Answer-b Amount(in million) Amount(in million) Current assets 60 Current liabilities 20 Fixed assets 60 long term liabilities 30 leased property under capital lease $118 obligations under capital lease $118 Total liabilities $168 stockholder's equity $70 Total asset $238 Total Liability and stock holder equity $238 Answer-c Original = $50/$120 = 0.416666667 Revised = $168/$238 = 0.705882353 Answer-d Original = $50/$70 = 0.714285714 Revised = $168/$70 = 2.4

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