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Enterprise Market Value of Hp

A.
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
the enterprise?

Solution Preview

a)
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 ...

Solution Summary

This solution contains step-by-step calculations to determine the enterprise market value of Hp considering the interest-bearing debt investments.

$2.19