Question 1
- In its annual report Driver Enterprises reported total debt of $560 and total assets of $2,919. Reviewing a footnote you have found that the company has ten years of operating lease obligations of $25 per year. The company faces a cost of debt of 5%. Calculate the debt ratio for the company after incorporating the lease obligations using the present value method. Present your answer in percentage terms, rounded to two decimal places, e.g., 20.00%.
10 points
Question 2
- In a footnote on its 2017 annual report Hewlett Packard reported the following operating lease obligations (in $ millions):
| Year | Amount |
| 2018 | 9,171 |
| 2019 | 7,517 |
| 2020 | 6,975 |
| 2021 | 5,937 |
| 2022 | 4,275 |
- Calculate the present value of the future operating lease obligations, assuming a discount rate of 7%.
10 points
Question 3
- Driver Enterprises reports 2017 earnings before interest and taxes (EBIT) of $688,716 and interest expense of $66,567. The company explained in a footnote that included in the operating expenses reported on the income statement were operating lease rental expenses of $170,605. The company reported in a separate footnote that it had capitalized interest of $8,353 during the year. Calculate the interest coverage ratio. Present your answer rounded to two decimal places, e.g., 20.00.
10 points
Question 4
- In a footnote on its 2017 annual report Hewlett Packard reported the following operating lease obligations (in $ millions):
| Year | Amount |
| 2018 | 10,003 |
| 2019 | 9,644 |
| 2020 | 7,670 |
| 2021 | 5,608 |
| 2022 | 2,000 |
| After 2022 | 8,000 |
- Calculate the present value of the future operating lease obligations, assuming a discount rate of 11%.
10 points
Question 5
- Driver Enterprises reports 2017 earnings before interest and taxes (EBIT) of $367,602 and interest expense of $27,429. The company explained in a footnote that included in the operating expenses reported on the income statement were operating lease rental expenses of $173,492. The present value of the company’s future operating lease obligations has been determined to be $769,707, based on footnote data and a discount rate of 8%. Calculate the fixed charge coverage ratio after incorporating the impact of the operating leases using the present value method. Present your answer rounded to two decimal places, e.g., 20.00.
10 points
Question 6
- Driver Enterprises reports 2017 earnings before interest and taxes (EBIT) of $522,530 and interest expense of $47,578. The company explained in a footnote that included in the operating expenses reported on its income statement were operating lease rental expenses of $147,000. The present value of the company’s future lease obligations has been determined to be $737,996, based on footnote data and a discount rate of 8%. Calculate the fixed charge coverage ratio after incorporating the impact of the operating leases using the 1/3-2/3 method. Present your answer rounded to two decimal places, e.g., 20.00.
10 points
Question 7
- In a footnote on its 2017 annual report Hewlett Packard reported the following operating lease obligations (in $ millions):
| Year | Amount |
| 2018 | 10,466 |
| 2019 | 8,683 |
| 2020 | 6,417 |
| 2021 | 4,637 |
| 2022 | 3,115 |
| After 2022 | 18,667 |
- Calculate the present value of the future operating lease obligations, assuming a discount rate of 8%.
10 points
Question 8
- Driver Enterprises reports 2017 earnings before interest and taxes (EBIT) of $711,090 and interest expense of $44,082. The company reported in a footnote that included in the operating expenses reported on the income statement were operating lease rental expenses of $126,000. It also reported the interest expenses of $30,036 were capitalized. The present value of the company’s future lease obligations has been determined to be $355,224, based on footnote data and a discount rate of 7%. Calculate the fixed charge coverage ratio after incorporating the impact of the operating leases using the 1/3-2/3 method. Present your answer rounded to two decimal places, e.g., 20.00.
10 points
Question 9
- In its annual report Driver Enterprises reported total debt of $520 and total assets of $2,168. In a footnote, the company also reported that it had future operating lease obligations of $187 per yearfor each of the next 6 years. The firm pays 9% on its debt financing. Using the 1/3-2/3 methodology, what would be the debt ratio of the firm after incorporating the impact of the operating leases? Present your answer in percentage terms, rounded to two decimal places, e.g., 20.00%.
10 points
Question 10
- In its annual report Driver Enterprises reported total debt of $815 and total assets of $1,797. Reviewing its footnote,you have determined that the present value of its future lease obligations to be $784. What would be the debt ratio of the firm after incorporating the impact of the operating leases? Present your answer in percentage terms, rounded to two decimal places, e.g., 20.00%.
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