Question

Analyzing, Interpreting and Capitalizing Operating Leases

Assume YUM! Brands, Inc., reports the following footnote relating to its capital and operating leases in its 2010 10-K report ($ millions).

Future minimum commitments...under non-cancelable leases are set forth below. At December 25, 2010, and December 26, 2009, the present value of minimum payments under capital leases was $236 million and $249 million, respectively.

Commitments ($ millions)	Capital	Operating
2011	$ 26	$ 550
2012	63	514
2013	23	483
2014	23	447
2015	23	405
Thereafter	222	2,605
	$ 380	$ 5,004

(a) Confirm that the implicit rate on YUM!'s capital leases is 7.63%.

N	Amount	IRR
0	Answer	Answer %
1	Answer
2	Answer
3	Answer
4	Answer
5	Answer
6	Answer
7	Answer
8	Answer
9	Answer
10	Answer
11	Answer
12	Answer
13	Answer
14	Answer
15	Answer

Using a 7.63% discount rate and rounding the remaining lease life to three decimal places, compute the present value of YUM!'s operating leases. (Use a financial calculator or Excel to compute. Do not round until your final answers. Round each answer to the nearest whole number.)

($ millions)	Present Value
Year 1	Answer
Year 2	Answer
Year 3	Answer
Year 4	Answer
Year 5	Answer
After 5	Answer
Total*	Answer

Answer 1