Operating Lease Treatment in DCF

This problem practices one of the key judgment calls in intrinsic valuation, separating operating expenses from financing obligations so free cash flow and enterprise value are built consistently. In investment banking interviews, candidates need to show they understand that lease commitments can behave like debt when they create fixed contractual payments, and that this affects both the cash flow forecast and the bridge from enterprise value to equity value. Interviewers ask this because lease accounting can materially change valuation for businesses with significant leased assets, and they want to see whether the candidate can apply the right treatment without double counting or omitting a real obligation.