2.

(12 marks)

The lease payments from footnote disclosures of an operating lease

Year Lease payments ($)

1. 1,375
2. 1,210
3. 825

Year 4 and after 4,125

Assume a discount rate of 8%.

Required:

a.Calculate the PV of all the lease payments. (6 marks)

b.Assume a 10% discount rate and a tax rate of 25%, so that the PV of all the lease payments is $5,220.

Complete the I/S figures

Income Statement Effects (6 marks)

	As Reported	Adjustment	Adjusted
NOPAT	$1,500	??	??
INT(1-tax rate)	475	??	??
NI	$1,025	??	??