MK invest reported 1,5 billion USD in equity on its balance sheet in 2019. It reported 100 million in debt. From its income statement you read that the firm made 90 million in operating lease payments, and that their commitments to make lease payments for the next five years and beyond are:

Year	Operating Lease Expense
1	95 million
2	90 million
3	85 million
4	85 million
5	80 million
Lump sum	410 million

The firms current cost of borrowing is 7,5 %. EBIT (with operating lease expensed) was 250 million.

a) Estimate the debt value of the operating leases and calculate the adjusted D/E-ratio.

b) Assuming that operating leases have been capitalized, the adjusted operating income can be calculated either by assuming straight line depreciation or by assuming depreciation = principal payments. Calculate the adjusted operating income using both methods.

c) What are the effects on net income from capitalizing operating leases?