The effect of leases on financial ratios - Extra lease problem

# The effect of leases on financial ratios - Extra lease problem

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The effect of leases on financial ratios Some financial information about Retail Inc. and Store Inc. is given below: You are asked to analyze these companies and specifically analyze the impact of the leases on different financial ratios. a. Compute the present value of the lease obligations for Retail Inc. using an annual interest rate of 8%. You should assume all payments are made at the end of the year, and all payments after year X6 are equal to the payment in year X6. b. Compute the present value of the lease obligations for Stores Inc. using an annual interest rate of 8%. You should assume all payments are made at the end of the year, and all payments after year X6 are equal to the payment in year X6. Error! Hyperlink reference not valid. c. Compute the total liabilities to asset ratio and the long-term debt to assets ratio for Retail Inc.

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Unformatted text preview: for the end of year X1. d. Compute the total liabilities to asset ratio and the long-term debt to assets ratio for Stores Inc for the end of year X1. e. Repeat c and d and compute the total liabilities to asset ratio and the long-term debt to assets ratio for both companies for the end of year X1 assuming the companies capitalize the leases. Problem Five: The effect of leases on financial ratios a. Retail Inc. *Present value of an annuity of \$542 million for 2.847 periods (= \$1,543/\$542), then discounted back five periods. b. Stores Inc. *Present value of an annuity of \$312 million for 2.795 periods (= \$872 /\$312), then discounted back five periods....
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The effect of leases on financial ratios - Extra lease problem

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