Use the Following Information to Answer the Next Question

Use the following information to answer the next question:
Operating assets = $3,000
Operating liabilities = $1,000
Book value of debt = Market value of debt = $1,500
Book value of equity = $500
Market value of equity = $900
Value of operating leases = $2,000
After-tax required return on unsecured debt = 6%
Required return on equity (CAPM ) = 13%
After-tax required return on secured debt = 5%
-What are (1 ) invested capital before adjustment for leases and (2 ) invested capital after adjustment for leases?

A) Invested capital before adjustment for leases = $2,000;invested capital after adjustment for leases = $4,000.
B) Invested capital before adjustment for leases = $4,000;invested capital after adjustment for leases = $3,000.
C) Invested capital before adjustment for leases = $2,000;invested capital after adjustment for leases = $3,000.
D) Invested capital before adjustment for leases = $4,000;invested capital after adjustment for leases = $4,000.

Correct Answer:

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