For the most recent financial year 2018, WOW reported operating lease expenses of $950 million, operating...

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For the most recent financial year 2018, WOW reported operatinglease expenses of $950 million, operating income (EBIT) of $2,000million, and interest-bearing debt of $4,000 million. The futureoperating lease commitments of the company are as follows: $1,200million (in 2019); $900 million (in 2020); $800 million (in 2021);$700 million (in 2022); $600 million (in 2023), and a lump sum ofcommitments beyond that point in time of $4,000 million. Thepre-tax cost of debt is 7.4%, the cost of capital is 13%, thefirm’s beta is 1.38, and the effective tax rate is 30%.

1. What is the total present value in 2018 of all operating leasecommitments?
2. What is the total debt of the company after reclassifyingoperating leases as debt?

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Firstly let us calculate cost of debtAfter tax cost of debt 74 1 03 518Now lets calculate the See Answer

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For the most recent financial year 2018, WOW reported operatinglease expenses of $950 million, operating income (EBIT) of $2,000million, and interest-bearing debt of $4,000 million. The futureoperating lease commitments of the company are as follows: $1,200million (in 2019); $900 million (in 2020); $800 million (in 2021);$700 million (in 2022); $600 million (in 2023), and a lump sum ofcommitments beyond that point in time of $4,000 million. Thepre-tax cost of debt is 7.4%, the cost of capital is 13%, thefirm’s beta is 1.38, and the effective tax rate is 30%.1. What is the total present value in 2018 of all operating leasecommitments?2. What is the total debt of the company after reclassifyingoperating leases as debt?