Use the following information to answer the next question:
Operating assets = $3,000
Operating liabilities = $1,000
Book value of debt = Market value of debt = $1,500
Book value of equity = $500
Market value of equity = $900
Value of operating leases = $2,000
After-tax required return on unsecured debt = 6%
Required return on equity (CAPM )= 13%
After-tax required return on secured debt = 5%
-What are (1 )invested capital before adjustment for leases and (2 )invested capital after adjustment for leases?

Question

Quizplus · Accepted Answer

Invested capital before adjustment for leases = Operating assets – Operating liabilities = $3,000 – $1,000 = $2,000; invested capital after adjustment for leases = Operating assets + Operating leases – Operating liabilities = $3,000 + $2,000 – $1,000 = $4,000

Use the Following Information to Answer the Next Question