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. c. Compute the total liabilities to asset ratio and the long-term debt to assets ratio for Retail Inc. 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.

Retail Inc. Store Inc. As of year-end X1 Current liabilities Long-term debt Other long-term liabilities Shareholders' equity Total $ 3,251 4,572 783 3,145 $11,751 $1,542 2,134 560 1,837 $6,073 Minimum payments under operating leases Year X2 Year X3 Year X4 Year X5 Year X6 After year X6 Total 712 682 667 629 542 1,543 $4,775 487 443 371 325 312 872 $2,810 Retail Inc. Store Inc. As of year-end X1 Current liabilities Long-term debt Other long-term liabilities Shareholders' equity Total $ 3,251 4,572 783 3,145 $11,751 $1,542 2,134 560 1,837 $6,073 Minimum payments under operating leases Year X2 Year X3 Year X4 Year X5 Year X6 After year X6 Total 712 682 667 629 542 1,543 $4,775 487 443 371 325 312 872 $2,810