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$70 Current liabilities$25 Capital assets70 Long-term liabilities40 Total liabilities$65 Sharesholders' equity75 Total assets$140 Total liabilities and equity$140

The footnotes would state that the company had $24 million in annual capital lease obligations over the next 15 years. Lease payments are payable at the end of the year.

a. Discount these annual lease obligations back to the present at a 6 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

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?

Yes

No