A 2011 lease footnote is provided following this question. Use only the information in the footnote to answer the following questions.

a) If the firm had to capitalize future minimum lease payments under operating leases, what amount of asset and liability would need to be added to the balance sheet? Assume that the amounts due after 2016 are paid in 5 equal annual installments (round to the nearest thousand). Use a discount rate of 6%. Assume all payments occur at the end each fiscal year. Ignore any revenues associated with the leases.

b) If the firm capitalized future minimum lease payments under operating leases on Jan. 1, 2012, what would be the anticipated effect on 2012 after-tax income? Assume that the firm does not plan to enter into any new leases in the coming year. Assume that your answer to part (a) was $400 million. Assets currently under operating leases have an average expected remaining economic life of 9 years with salvage value of $40 million. Assume all of the assets under operating leases are depreciable assets. The firm uses straight-line depreciation methods for similar assets that it legally owns and has a federal marginal tax rate of 35%

c) Is the rate that the firm uses to capitalize their capital leases more or less than 8%? Assume payments are made at the end of each year.

Note 8-COMMITMENTS AND CONTINGENCIES Commitments The Company currently leases office and fulfillment center facilities and fixed assets under noncancelable operating and capital leases. Rental expense under operating lease agreements for 2011, 2010 and 2009 was $81 million, $98 million and $43 million, respectively. Future minimum commitments are as follows: Capital Leases Operating Leaves Year Ending December 31. 2012 $ GEE II LENOS 6.573 ST.501 5014 41 18.729 41.953 2016 42 40 Thereafter 206 373 Total estimated cash outflows 17.953 457.743 Less imputed interest (1.538) Present value of net minimum lease payments 16.413 Less current portion (9.922) Long-term capital lease obligation 6.493 At December 31, 2011, the Company remains obligated under gross lease obligations of $121 million associated with its operational restructuring and anticipates receiving sub-lease income of $68 million to offset these obligations, of which $17 million are to be received under non-cancelable subleases