Kienzle Inc. is a retail company that reported an operating loss
of $125 million in the most recent twelve months, but this loss was
after an operating lease payment of $275 million during the period.
There are three more years left on the lease, with the following
payments coming due each year:
You believe that the contractual commitment should be treated as
debt, and that the pre-tax cost of debt for Kienzle Inc is 5%. If
you capitalize these commitments, estimate the corrected operating
income or loss for the most recent twelve months.
Year 1: Lease commitments of $250
Year 2: Lease commitments of $200
Year 3: Lease commitments of $150
Kienzle Inc. is a retail company that reported an operating loss of $125 million in the most recent twelve months, but t
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