The Ellis Corporation has heavy lease commitments. A new vice$-$president wants the lease obligations footnoted in the balance sheet as follows: Use Appendix D$.$

ELLIS CORPORATION

$($$ millions$)$

Current assets $$80$ Current liabilities $$20$

Capital assets $80$ Long$-$term liabilities $55$

Total liabilities $$75$

Sharesholders' equity $85$

Total assets $$160$ Total liabilities and equity $$160$

The footnotes would state that the company had $$34$ million in annual capital lease obligations over the next $25$ years. Lease payments are payable at the end of the year.

a$.$ Discount these annual lease obligations back to the present at a $9$ percent discount rate. $($Enter the answer in millions. Round $"$PV Factor" to $3$ decimal places. Round the final answer to nearest whole million.$)$

Annual lease obligations $ million

b$.$ Construct a revised balance sheet that includes lease obligations, as in Table $166.($Enter the answers in millions. Round $"$PV Factor" to $3$ decimal places. Round the final answers to nearest whole million.$)$

Balance Sheet $($$ millions$)$

Current assets $ Current liabilities $

Capital assets Long$-$term liabilities

Leased property under capital lease Obligations under capital lease

Total liabilities

Shareholders' equity

Total assets $ Total liabilities and

shareholders' equity $

c$.$ Compute total debt to total assets on the original and revised balance sheets. $($Round $"$PV Factor" to $3$ decimal places. Round the final answers to $1$ decimal place.$)$

Original $\%$

Revised $\%$

d$.$ Compute total debt to equity on the original and revised balance sheets.$($Round $"$PV Factor" to $3$ decimal places. Round the final answers to $1$ decimal place.$)$

Original $\%$

Revised $\%$

e$.$ In an efficient capital market environment, should the consequences of the CICA recommendation, as viewed in the answers to parts c and d$,$ change stock prices and credit ratings?

multiple choice

Yes

No