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Essay / Research Paper Abstract
A 5 page paper in 2 sections providing a capital budgeting analysis of long-term operating leases, then assessing those same leases as capital leases. The second section consists of 11 items identifying and briefly discussing items on the balance sheet. Bibliography lists 1 source.
Page Count:
5 pages (~225 words per page)
File: CC6_KSacctFinito.rtf
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Unformatted sample text from the term paper:
Finito has an assortment of outstanding long-term types of debt ranging in interest costs from 8% to 10%, with an average of 8.75%. The leasing agreements for
operating leases for facilities space and for equipment total the amounts shown in the following table. Lease payments for 2002 - 2004 have been completed; those for 2005 to
beyond 2010 are in the future and so are subject to a discount rate to arrive at the net present value of the total of all lease payments for well
past 2010. There are several provisions with some of the leases. In the early years, lease payments are just that. Several
of the leases are renewable, however, at reduced rates with the provision that Finito treat the buildings and equipment as though they were the capital property of Finito and pay
all maintenance costs, property taxes and insurance on the items. Because Finito will gain tax benefits from these additional requirements, its true cost is less than the average interest
rate it would be able to expect to secure for the purchase of these items. In the following table, the net present value of the total lease arrangement is
calculated using a discount rate of 8%. Discount
Rate Total Factor Present At end of year... Cash Flows 8% Value 2005 2006
2007 2008 2009 2010+ Historic Payments 2002 25,570
...