Retail Inc. has both operating and capital leases. Below is a portion of its lease footnote taken from its 2006 financial statements.
$\begin{array}{lrr}
&\text { Capital}&\text { Operating }\
\text { MLP (in millions) }\
2007 & \$ 233 & \$ 529 \
2008 & 201 & 567 \
2009 & 199 & 554 \
2010 & 180 & 540 \
2011 & 145 & 528 \
\underline{\text { Thereafter }} & \underline{1,050} & \underline{5,941} \
\text { Total MLP } &2,008 & \underline{ \underline{\$ 8,659}}\
\text { Less interest } & \underline{ 680} \
\text { Present value of MLP } & \underline{ \underline{ \$ 1,328 }}\
\text { Current } & 100 \
\text { Long term } & \$ 1,228
\end{array}$

a. Obtain a crude estimate of the remaining length of the operating and capital leases.
b. Estimate the interest rate implicit in the capital leases.
c. Compute the present value of the operating leases.

Question

Retail Inc. has both operating and capital leases. Below is a portion of its lease footnote taken from its 2006 financial statements.
$\begin{array}{lrr}
&\text { Capital}&\text {  Operating }\
\text { MLP (in millions) }\
2007 & \$ 233 & \$ 529 \
2008 & 201 & 567 \
2009 & 199 & 554 \
2010 & 180 & 540 \
2011 & 145 & 528 \
 \underline{\text { Thereafter }} & \underline{1,050} & \underline{5,941} \
 \text { Total MLP } &2,008 &  \underline{ \underline{\$ 8,659}}\
\text { Less interest } & \underline{ 680} \
\text { Present value of MLP } & \underline{ \underline{ \$ 1,328 }}\
\text { Current } & 100 \
\text { Long term } & \$ 1,228
\end{array}$

a. Obtain a crude estimate of the remaining length of the operating and capital leases.
b. Estimate the interest rate implicit in the capital leases.
c. Compute the present value of the operating leases.

Quizplus · Accepted Answer

The Answer of Retail Inc. has both operating and capital leases. Below is a portion of its lease footnote taken from its 2006 financial statements.
$\begin{array}{lrr}
&\text { Capital}&\text {  Operating }\
\text { MLP (in millions) }\
2007 & \$ 233 & \$ 529 \
2008 & 201 & 567 \
2009 & 199 & 554 \
2010 & 180 & 540 \
2011 & 145 & 528 \
 \underline{\text { Thereafter }} & \underline{1,050} & \underline{5,941} \
 \text { Total MLP } &2,008 &  \underline{ \underline{\$ 8,659}}\
\text { Less interest } & \underline{ 680} \
\text { Present value of MLP } & \underline{ \underline{ \$ 1,328 }}\
\text { Current } & 100 \
\text { Long term } & \$ 1,228
\end{array}$

a. Obtain a crude estimate of the remaining length of the operating and capital leases.
b. Estimate the interest rate implicit in the capital leases.
c. Compute the present value of the operating leases.

Retail Inc A Obtain a Crude Estimate of the Remaining Length of a Portion