Question

CLICK HERE TO REVIEW LEARNING OBJECTIVES QUESTION 4 Partially correct Mark 0.33 out of 1.00 Flag question Analyzing and Interpreting Leasing Footnote The Home Depot, Inc. included the following footnote in its fiscal 2014 10-K report: The approximate future minimum lease payments under capital and all other leases at February 1, 2015 were as follows (amounts in millions): (in millions) Capital Leases Operating Leases 2015 $113 $893 2016 817 2017 108 737 2018 101 638 2019 97 561 880 4,059 Thereafter Total minimum lease payments 1410 $7.705 726 Less imputed interest Present value of minimum lease payments 684 36 Amount included in current liabilites $648 Long-term lease obligations excluding current installments The assets under capital leases recorded in Property and Equipment, net of amortization, totaled $557 million and $374 million at February 1, 2015 and February 2, 2014, respectively The Home Depot reported stockholders' equity of s9,322 million and total assets of $39,946 million in it fiscal 2014 balance sheet. a. What was the total amount of capital lease obligations reported in The Home Depot's fiscal 2014 balance sheet? S 684 million b. Using a 4% discount rate, compute the present value of Home Depot's scheduled operating lease payments. Round answer to the nearest whole number 34,302 xmillion c. Estimate the effect that capitalizing operating leases would have on The Home Depot's debt-to-equity ratio Compute Home Depot's debt-to-equity ratio assuming operating leases are capitalized. Round answer t one decimal place. 3.3

Answer 1

b. Present Value (PV) of Operating Lease Payments

893 8177376385614059 04+ 1042+1.043+0441.045+ 1.046

= 859 + 755 + 655 + 545 + 461 + 3208

= $6483 million

c. Assuming Operating lease are capitalized.

Total Assets = 39,946,

Shareholders Equity = 9322

Hence, Total Liabilities = Total Assets - Shareholders equity

= 39,946 - 9322

= 30,624

Capitalization of Operating lease results to increase in total liabilities.

Therefore, Total Liabilities (including capitalized operating lease) = 30,624 + 6483 = 37,107

Debt-equity ratio = Total Liabilities/Shareholder's Equity

= 37107/9322

=3.98