HP_LongTermDebt_FY2020

pdf

School

University Of Chicago *

*We aren’t endorsed by this school

Course

20100

Subject

Business

Date

Feb 20, 2024

Type

pdf

Pages

2

Uploaded by BailiffRabbitPerson818

Report
The University of Chicago Financial Accounting 20100 Booth School of Business Hewlett - Packard, Inc. Long Term Debt Hewlett-Packard, Inc. (HP) is California-based multinational company focused on developing and manufacturing computer hardware, software and technology consulting services. The company was founded in a garage in Palo Alto, California, by Bill Hewlett and Dave Packard in 1939 and had an IPO in November, 1957 at $16.00 per share; as of December 2020, HP’s market capitalization was about $31.71 billion. HP heavily relies on debt financing. Its long-term debt (the sum of its current portion and long-term portion of its long-term debt) at the end of 2019 was $4.8 billion. Answer the following questions using the excerpts from Hewlett-Packard’s annual report for the year ended October 31, 2020: 1. What is the amount of HP’s long-term debt at the end of fiscal year 2020? 2. What is the face value of HP’s long-term debt (including other financing obligations)? On average, did HP issue its long-term debt at par, discount or premium? 3. What is HP’s interest expense for 2020? 4. How much cash did HP pay for interest in 2020? 5. What is the non-cash component on HP’s interest expense in 2020? Is it amortization of discount or amortization of premium? Suppose that cash paid for interest in 2020 includes 22 million related to interest due in 2019. 6. For each of the following bond issues, determine (i) the face value, (ii) the coupon rate, (iii) the net book value as of October 2020, (iv) whether the bond was issued at discount, premium, or at par, and (v) whether the historical discount rate (aka historical interest rate) is higher or lower than the coupon rate. Assume that for these notes no additional debt was retired or issued during fiscal year 2020. a. US Dollar Global Notes (due September 2021) b. US Dollar Global Notes (due September 2041) c. US Dollar Global Notes(due June 2025) 7. Answer the following questions pertaining to the US Dollar Global Notes due September 2041: a. What is the interest expense HP recognized pertaining to this bond? b. What is the historical interest rate for the bond?
The University of Chicago Financial Accounting 20100 Booth School of Business 8. Suppose that HP had a zero-coupon bond and made the following disclosure about it: 2020 2019 $503 zero-coupon bond due in 2031 356 345 Answer the following questions pertaining to US Dollar Zero Coupon bond due in 2031: a. What is the interest expense HP recognized pertaining to this bond? b. What is the historical interest rate for the bond? 9. Footnote 9 of HP’s 2020 10K contains the following information: “HP estimates the fair value of its debt primarily using an expected present value technique, which is based on observable market inputs using interest rates currently available to companies of similar credit standing for similar terms and remaining maturities and considering its own credit risk. […] The fair value of HP’s short- and long- term debt was $6.7 billion at October 31, 2020 compared to its carrying amount of $6.2 billion at that date.” Using the above information, answer the following questions: a. Is the estimated value of debt greater than, smaller than or the same as the net book value (aka carrying amount or book value)? What explains the difference? How does GAAP reflect this? b. Suppose HP repurchased all of its debt. What would be the effect on HP’s net income?
Your preview ends here
Eager to read complete document? Join bartleby learn and gain access to the full version
  • Access to all documents
  • Unlimited textbook solutions
  • 24/7 expert homework help

Related Documents

Copy of POGIL 2.docx
INT 220 Module One (1).docx
Copy of law-firm-business-plan-sample.docx
Wk7. Home Value sales.xlsx
Chapter 6 Homework Solution.docx
annotated-Allscripts_Software_FY2021_completed.pdf
annotated-apple_revenue_recognition%20completed.pdf
Final Report Bus Mag .docx
490S3-Midterm-MandeepKaur-20000793.docx
DAT_520_Adriana_Carroll_Milestone_Six.docx
DAT_520_Adriana_Carroll_Tool_Analysis.docx
Screenshot 2023-12-04 at 4.54.25 PM.png
Recommended textbooks for you
Text book image
Foundations of Business (MindTap Course List)
Marketing
ISBN:9781337386920
Author:William M. Pride, Robert J. Hughes, Jack R. Kapoor
Publisher:Cengage Learning
Text book image
Foundations of Business - Standalone book (MindTa...
Marketing
ISBN:9781285193946
Author:William M. Pride, Robert J. Hughes, Jack R. Kapoor
Publisher:Cengage Learning
Text book image
Marketing
Marketing
ISBN:9780357033791
Author:Pride, William M
Publisher:South Western Educational Publishing
SEE MORE TEXTBOOKS
Recommended textbooks for you
Text book image
Foundations of Business (MindTap Course List)
Marketing
ISBN:9781337386920
Author:William M. Pride, Robert J. Hughes, Jack R. Kapoor
Publisher:Cengage Learning
Text book image
Foundations of Business - Standalone book (MindTa...
Marketing
ISBN:9781285193946
Author:William M. Pride, Robert J. Hughes, Jack R. Kapoor
Publisher:Cengage Learning
Text book image
Marketing
Marketing
ISBN:9780357033791
Author:Pride, William M
Publisher:South Western Educational Publishing
SEE MORE TEXTBOOKS