Santa Corporation NOTE: These Multiple Choice Questions Require Present Value

question 39

Multiple Choice

Santa Corporation NOTE: These multiple choice questions require present value information.
Santa Corporation manufactures Christmas decorations and supplies throughout the world.The company owns property,plant,and equipment and also enters into operating leases for certain facilities.Assume that Santa's incremental borrowing rate is 8%.The company's tax rate is 40%.Listed below is selected financial data for Santa and a portion of the company's operating lease footnote.
Assuming that Santa Corporation was required to capitalize its operating lease how would the company's fixed asset ratio change under this assumption.

• A) increase
• B) decrease
• C) no effect
• D) unable to determine

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Definitions:

Bought

Acquired through the exchange of money for goods or services, often used in the context of media, where advertising space is purchased.

Imaginative Experiences

Engagements or activities that encourage creativity and invention, often allowing individuals to explore new ideas or worlds.

Power

The ability or capacity to do something or act in a particular way, often implying the control or influence over others.

Frivolity

A lack of seriousness or sense of importance, often characterized by trivial or lighthearted behavior or content.