analyzing, interpreting and capitalizing operating leases assume

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 $245 million and $228 million, respectively.

Commitments ($ millions)     Capital     Operating

2011    $ 27           $ 422

2012                                        27               367

2013                                        65    339

2014                                        23    378

2015                                        23    280

Thereafter                               276             1,964

                                             $ 441          $ 3,750

(a) Confirm that the implicit rate on YUM!’s capital leases is 8.36%.

N Amount IRR

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Using a 8.36% 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

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* (Use subsequent rounded answers for calculation.)