The following information is gathered from Kohls Corporations 10-K report for fiscal year ended Feb 3, 2001.

Future minimum lease payments at February 3, 2001, under leases that have initial or remaining noncancellable terms in excess of one year, are as follows:

Capital Operating Leases Leases

(In Thousands)

Fiscal year:

2001 $ 5,852 $ 162,517

2002 5,872 171,177

2003 5,773 164,867

2004 6,002 160,790

2005 6,063 160,390

Thereafter 62,123 2,526,654

-------------------- ----------------------

91,685 $3,346,395

Less amount representing interest (45,748)

Present value of minimum lease payments $45,937

Other reported balance sheet information (in thousands):

Total shareholders equity = $1,500,000

Total liabilities and shareholders equity = $4,000,000

Required: 1. Determine the interest rate implicit in the present value of capital lease obligations of Kohls, if the amount after 2005 would be paid over a 10-year period. Hint: you can start with 10% as the discount rate. If you want the present value to be larger, use a smaller discount rate. If you want the present value to be smaller, use a larger discount rate.

2. Using the interest rate from part (1), calculate the present value of the operating lease obligations of Kohls, if the amount after 2005 would be paid over a 16-year period.

3. Using the reported balance sheet information, calculate the total liabilities to total shareholders equity ratio and total liabilities to total assets ratio.

4. Repeat part (3) after treating the operating leases as if they are being accounted for as capital leases.