FNCE 5880 OPERATIONAL LEASES TO CAPITAL LEASES                                             1 Gelson’s Markets has listed operating leases on its financial statements.       2 They have listed the value of operating leases for 2012 – through 2016 by each year and in total thereafter. 3 There are no capital leases on its books at the present time.         4 Use the operating lease figures for 2016 as the annual lease amounts for the future periods.     5 Use 5.6% as the cost of capital to discount the lease payments.         6 Use straight line depreciation to depreciate the leased assets over its life       7 You are required to convert these operating leases into capital leases by year and analyze its effect   on Gelson’s financial statements and key ratios for 2012.         8 Restate the income statement & balance sheet for 2012 after converting the operating leases to capital leases                                                                     Year       Operating Leases                   (in millions of dollars)         2012       $275             2013       237             2014       425             2015       279             2016       325             Thereafter     2178                                   INCOME STATEMENT: ($ in millions)                       Before After                                 Sales       $20,000             Operating Expenses     17500             Income before interest & taxes 2500             Intest expense     0             Income taxes     698             Net Icome     $1,802                                   BALANCE SHEET:                           Before After     Before After   Current Assets     $6,000   Current Liabilities $3,750     Fixed Assets     3100   Long Term Liabilities 700                 Stockholders Equity 4650     Total Assets     $9,100   Total Liab + Equity $9,100