Question
Capitalizing Operating Leases The following information is taken from the 2012 annual report of Delta Air Lines, Inc.: Total assets $44,550 Total liabilities $46,681 Stockholders
Capitalizing Operating Leases The following information is taken from the 2012 annual report of Delta Air Lines, Inc.:
Total assets | $44,550 |
Total liabilities | $46,681 |
Stockholders deficit | $(2,131) |
Operating Leases
2013 | $1,005 | $502 | $1,507 |
2014 | 949 | 484 | 1,433 |
2015 | 859 | 473 | 1,332 |
2016 | 736 | 423 | 1,159 |
2017 | 627 | 373 | 1,000 |
Thereafter | 6,414 | 1,001 | 7,415 |
Total minimum lease payments | $10,590 | $3,256 | $13,846 |
Assume that the cost of debt implicit in the companys operating leases is 5%.
Calculate the present value of Deltas operating leases at year-end. Hint - Assume that any "thereafter" amount is straight-lined over the remaining lease period of 2018-2025 using the lease payment of $1,000, the 5th year (2017). The final lease payment in year 2025 will be a "plug" to balance the total future minimum lease payments of $13,846. Use Excel or a financial calculator for your computations. Do not round until your final answer. Round your answer to the nearest million dollars.
$Answer
million
Calculate the companys total liabilities to total assets ratio for the year (a) with and (b) without considering the companys operating leases.
Round your answers to two decimal places.
(a) With operating lease capitalization | Answer |
(b) Without operating lease capitalization | Answer |
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