The Ellis Corporation has heavy lease commitments. Prior to SFAS No. 13, it merely footnoted lease obligations in the balance sheet, which appeared as follows: Use Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods.

In $Millions	In $Millions
Current Assets: $50	Current Liab: $10
Fixed Assets: 50	Long-Term Liab: 30
---	---
	Total Liab: $40
	Owners' Equity: 60
	---
Total Assets: $100	Total Liab &OE: $100

The footnotes stated that the company had $10 million in annual capital lease obligations for the next 20 years.

a.

Discount these annual lease obligations back to the present at a 6 percent discount rate. (Do not round intermediate calculations. Round your answer to the nearest million. Input your answer in millions of dollars (e.g., $6,100,000 should be input as "6").)

b.

Construct a revised balance sheet that includes lease obligations. (Do not round intermediate calculations. Round your answers to the nearest million. Input your answer in millions of dollars (e.g., $6,100,000 should be input as "6").)

Current Assets: $	Current Liab: $
Fixed Assets:	Long-Term Liab
Leased prop under capital lease	Obligations under captial lease
	Total Liab: $
	Owner's Equity:
Total Assets: $	Total Liab & OE: $

c.

Compute the total debt to total asset ratio for the original and revised balance sheets. (Input your answers as a percent rounded to 2 decimal places.)

d.

Compute the total debt to total equity ratio for the original and revised balance sheets. (Input your answers as a percent rounded to 2 decimal places.)

e.

In an efficient capital market environment, should the consequences of SFAS No. 13, as viewed in the answers to parts c and d, change stock prices and credit ratings?

	Yes
	No