What is the rationale for capitalizing operating leases in a DCF valuation?

Capitalizing operating leases in a discounted cash flow (DCF) valuation is primarily grounded in the rationale that they are similar to long-term debts. When a company enters into an operating lease, it effectively commits to making payments over a period, much like it would with debt obligations. This creates a future financial obligation that impacts the company's cash flows and balance sheet.

By capitalizing these leases, analysts better reflect the financial realities faced by the company, including its total liabilities. This approach enhances the accuracy of the valuation by ensuring that all obligations are accounted for and gives a clearer picture of the company's asset and liability structure. Thus, treating operating leases as liabilities aligns the valuation more closely with the operational and financial risks that the company faces, much like its other long-term debt.

The other options do not adequately capture the primary motivation behind capitalizing operating leases. Immediate tax benefits from leases do not specifically justify capitalization, nor do capitalized leases eliminate company liabilities. Additionally, writing off these costs as operational expenses does not reflect the long-term financial obligations inherent in operating leases.