‘Key Assumptions: 1 Discount rate on operating leases is 7% for both companies. It is likely to be somewhat higher for FedEx. 2. We have to spread out the lease payments reported by the company beyond the first five years. 3. The operating lease payment for 1999 is not reported for UPS. The above analysis assumes a value of $220m. ‘This implies that, adjusting operating leases to capital leases at the beginning of 1999, would increase assets and liabilities by $8,139.2 million for FedEx, and by $911.7 million for UPS. Assuming no new operating lease arrangements are entered in 1999, the closing balances of assets and liabilities will be as follows: fis FedEx urs Assets Boginning value of operating loase assets 139.2 on7 Less: 1999 depreciation expense (assuming 15 year life) 5426 60.8 Ending value of operating lease assets, 7,586.6 850.9 Labiities Beginning value of operating lease lability 81392 17 Less: present value of 1999 payment (12206) (205.6) Ending labilty in 1999 values 6918.6 706.1 29 755.5 Ending liability in 2000 valves (Liabilty in 1999 values"t.07) 7