15–5. (Describing a firm's capital structure) (Related to Checkpoint 15.1 on page 502) Home Depot, Inc. (HD), operates as a home improvement retailer primarily in the United States, Canada, and Mexico. The balance sheet for Home Depot for February 3, 2008, included the following liabilities and owners’ equity: ($ thousands) Financial Structure Liabilities $ 9,185,000 2,047,000 Accounts payable Short-term/current debt Other current liabilities Total current liabilities 1,474,000 $12,706,000 11,383,000 Long-term debt Other long-term liabilities Long-term liabilities Stockholders’ equity Total 2,521,000 $13,904,000 $17,714,000 $44,324,000 a. What are Home Depot's debt ratio and interest-bearing debt ratio? b. If Home Depot has common equity with a market value of $44.9 billion and no excess cash, what is the firm's debt-to-enterprise-value ratio? (Hint: Assume that the market value of the firm's interest-bearing debt equals its book value.)

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15-5. (Describing a firm's capital structure) (Related to Checkpoint 15.1 on page 502)
Home Depot, Inc. (HD), operates as a home improvement retailer primarily in the
United States, Canada, and Mexico. The balance sheet for Home Depot for February
3, 2008, included the following liabilities and owners' equity:
($ thousands)
Financial Structure
Liabilities
$ 9,185,000
2,047,000
1,474,000
$12,706,000
11,383,000
2,521,000
$13,904,000
$17,714,000
$44,324,000
Accounts payable
Short-term/current debt
Other current liabilities
Total current liabilities
Long-term debt
Other long-term liabilities
Long-term liabilities
Stockholders’ equity
Total
a. What are Home Depot's debt ratio and interest-bearing debt ratio?
b. If Home Depot has common equity with a market value of $44.9 billion and no
excess cash, what is the firm's debt-to-enterprise-value ratio? (Hint: Assume that
the market value of the firm's interest-bearing debt equals its book value.)
Transcribed Image Text:15-5. (Describing a firm's capital structure) (Related to Checkpoint 15.1 on page 502) Home Depot, Inc. (HD), operates as a home improvement retailer primarily in the United States, Canada, and Mexico. The balance sheet for Home Depot for February 3, 2008, included the following liabilities and owners' equity: ($ thousands) Financial Structure Liabilities $ 9,185,000 2,047,000 1,474,000 $12,706,000 11,383,000 2,521,000 $13,904,000 $17,714,000 $44,324,000 Accounts payable Short-term/current debt Other current liabilities Total current liabilities Long-term debt Other long-term liabilities Long-term liabilities Stockholders’ equity Total a. What are Home Depot's debt ratio and interest-bearing debt ratio? b. If Home Depot has common equity with a market value of $44.9 billion and no excess cash, what is the firm's debt-to-enterprise-value ratio? (Hint: Assume that the market value of the firm's interest-bearing debt equals its book value.)
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