Verizon Communications, Inc., provides the following footnote relating to leasing activities in its 10-K report.

a. Using your financial calculator or Excel spreadsheet, confirm that Verizon capitalized its capital leases using a rate of \(9.44 \%\).

b. What effect does the failure to capitalize operating leases have on Verizon's balance sheet? Over the life of its leases, what effect does this lease classification have on net income?

c. Compute the present value of Verizon's operating leases, assuming a \(9.44 \%\) discount rate and rounding the remaining lease life to three decimal places. How might we use this additional information in our analysis of the company?

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The aggregate minimum ental commitments under noncancelable leases for the periods shown at December 31, 2012, are as follows: Years (dollars in millions) 2013... 2014 2015 2016 2017 Thereafter. Total minimum rental commitments.. Less interest and executory costs... Present value of minimum lease payments. Less current installments.... Long-term obligation at December 31, 2012... Capital Leases Operating Leases $ 2,038 1,840 1,572 1,280 $ 86 67 57 54 44 99 407 109 298 64 $234 992 4,119 $11,841