Essay
American Symbol Outfitters includes the following information about its operating leases in its fiscal 2016 annual report:
A. Calculate the present value of operating lease payments using a discount rate of 6%.
B. Assume that the leased equipment has a useful life of 8 years and no salvage value. Estimate the effect on profit before taxes of capitalizing these leases. Assume straight-line depreciation. Assume that rental expense in 2016 is the same as 2017 lease payments.
C. How would ROE and other financial ratios from the ROE decomposition be affected if these the company capitalized these operating leases?
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A. Using the NPV function in Excel, the ...View Answer
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