General Mills, Inc., the large manufacturer of packaged foods, reported the following
in its annual report for the year ending May 25, 2008 (in millions):
Short-term borrowing $ 442.0
Long-term debt 4,348.7
Stockholders' equity 6,215.8
The short-term borrowing and long-term debt are carried on the balance sheet at
approximately their market value. The firm's 337.5 million shares traded at $62 per
share when the annual report was released. From these numbers, calculate General
Mills's enterprise market value (the market value of the firm).
b. Hewlett-Packard, the computer equipment manufacturer and systems consultant, had
2,473 million shares outstanding in May 2008, trading at $47 per share. Its most
recent quarterly report listed the following (in millions):
Investments in interest-bearing debt securities and deposits $ 11,513
Short-term borrowings 711
Long-term debt 7,688
Stockholders' equity 38,153
Calculate the enterprise market value of Hewlett-Packard. The question requires you
to consider the treatment of the interest-bearing debt investments. Are they part of
Enterprise Value = Market Cap + Preferred Stock + Debt - Cash Equivalents
Market cap = 337.5*62=20925
Debt = Short term borrowings + long term debt = 442+4348.7=4790.7
Preferred stock = 0
Since no ...
This solution contains step-by-step calculations to determine the enterprise market value of Hp considering the interest-bearing debt investments.