The Ellis Corporation has heavy lease commitments. Prior to SFAS
No. 13, it merely footnoted lease obligations in the balance sheet,
which appeared as follows: Use Appendix D for an approximate answer
but calculate your final answer using the formula and financial
calculator methods. In $ millions In $ millions Current assets $ 85
Current liabilities $ 10 Fixed assets 85 Long-term liabilities 70
Total liabilities $ 80 Stockholders' equity 90 Total assets $ 170
Total liabilities and stockholders' equity $ 170 The footnotes
stated that the company had $17 million in annual capital lease
obligations for the next 20 years. a. Discount these annual lease
obligations back to the present at a 6 percent discount rate. (Do
not round intermediate calculations. Round your answer to the
nearest million. Input your answer in millions of dollars (e.g.,
$6,100,000 should be input as "6").) b. Construct a revised balance
sheet that includes lease obligations. (Do not round intermediate
calculations. Round your answers to the nearest million. Input your
answer in millions of dollars (e.g., $6,100,000 should be input as
"6").) c. Compute the total debt to total asset ratio for the
original and revised balance sheets. (Input your answers as a
percent rounded to 2 decimal places.) d. Compute the total debt to
total equity ratio for the original and revised balance sheets.
(Input your answers as a percent rounded to 2 decimal places.) e.
In an efficient capital market environment, should the consequences
of SFAS No. 13, as viewed in the answers to parts c and d, change
stock prices and credit ratings? Yes No