Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

International Business The Challenges Of Globalization

Authors: John J. Wild, Kenneth L. Wild

9th Edition

0134729226, 978-0134729220

More Books

Students also viewed these Finance questions