Question

The following information is gathered from Bed Bath & Beyond’s 10-K report for fiscal year ended March 3, 2007. As of March 3, 2007, future minimum lease payments under noncancelable operating leases are as follows:

Fiscal Year               Amount         

2007     $  372,168        

2008             379,091   

2009             364,226   

2010             338,374   

2011     306,524        

Thereafter     1,435,481     

Total future minimum

lease payments $3,195,864   

If the appropriate discount rate is 10% for the operating leases and the amount after 2011 will be paid over a 4-year period, the present value of the operating leases is​

Answer 1

Statement showing Present value of Operating leases:

FISCAL YEAR	AMOUNT (A)	PVF@10% (B)	PRESENT VALUE (A*B)
2007	$ 372,168	0.9091	$ 338,338
2008	$ 379,091	0.8264	$ 313,281
2009	$364,226	0.7513	$ 273,643
2010	$338,374	0.6830	$ 231,109
2011	$306,524	0.6209	$ 190,321
2012	$358,870.25	0.5645	$202,582
2013	$358,870.25	0.5132	$184,172
2014	$358,870.25	0.4665	$167,413
2015	$358,870.25	0.4241	$152,197

Note 1: It is assumed that amounts are paid at the end of the year.

Note 2: It is assumed that amount paid ($1,435,481) after year 2011 is paid in equal installments over a four year period ie., $ 358,870.25 per year ($1,435,481/4) till year 2015.