Goff Computer
Goff Computer, INC.
Martin Teal
BUS 650 Managerial Finance
Instructor Scott Shaw
October 15, 2012
Goff Computer, INC. Goff Computer, INC has been around for about eight years and has over seventy stores. Goff Computer, INC had $97 million in sales last year and wants to know what the cost of capital is. In order to answer this several steps have to be taken which include comparing the company to Dell and how they work. Dell is a major computer company and they build the computers to fit the customer’s needs and demands. The task at hand for Goff Computer , INC is to determine its cost of capital. There are several steps that must be done to get to the end result. Step 1 gives directions on how to obtain the beginning information needed about Dell. Step 2 asks several questions and the responses are: * The most recent stock price is $18.16 * The market capitalization for Dell is 32.62B * Dell currently has 1.8B shares outstanding * The beta for Dell is 1.33 * The yield on 3-month Treasury bill is .865% * The cost of equity using CAPM is 16.71%
Step 3 instructs to go to www.reuters.com and find the competitors. However, there are none listed
Step 4 instructs to calculate the cost of debt for Dell by going to cxa.marketwtch.com/finra/BondCenter/Dfault.aspx DELL.GJ yield to maturity .754% | DELL.GF .911% | DELL.GL .724% | DELL.GP 0% | DELL.GO .946% | | | | | |
Step 5 asks about the weighted cost and the book value weights. The book value is higher.
Step 6 is the real question asking what the potential problems are and what suggestions I would have. The potential problems that I see when it comes to comparing the company to Dell are that Dell is a larger company and so things are different and constantly changing for them. Dell is more stable and has loyal customers so they can afford to take more risk as well. The only improvement that I
Martin Teal
BUS 650 Managerial Finance
Instructor Scott Shaw
October 15, 2012
Goff Computer, INC. Goff Computer, INC has been around for about eight years and has over seventy stores. Goff Computer, INC had $97 million in sales last year and wants to know what the cost of capital is. In order to answer this several steps have to be taken which include comparing the company to Dell and how they work. Dell is a major computer company and they build the computers to fit the customer’s needs and demands. The task at hand for Goff Computer , INC is to determine its cost of capital. There are several steps that must be done to get to the end result. Step 1 gives directions on how to obtain the beginning information needed about Dell. Step 2 asks several questions and the responses are: * The most recent stock price is $18.16 * The market capitalization for Dell is 32.62B * Dell currently has 1.8B shares outstanding * The beta for Dell is 1.33 * The yield on 3-month Treasury bill is .865% * The cost of equity using CAPM is 16.71%
Step 3 instructs to go to www.reuters.com and find the competitors. However, there are none listed
Step 4 instructs to calculate the cost of debt for Dell by going to cxa.marketwtch.com/finra/BondCenter/Dfault.aspx DELL.GJ yield to maturity .754% | DELL.GF .911% | DELL.GL .724% | DELL.GP 0% | DELL.GO .946% | | | | | |
Step 5 asks about the weighted cost and the book value weights. The book value is higher.
Step 6 is the real question asking what the potential problems are and what suggestions I would have. The potential problems that I see when it comes to comparing the company to Dell are that Dell is a larger company and so things are different and constantly changing for them. Dell is more stable and has loyal customers so they can afford to take more risk as well. The only improvement that I
References: Ross, S., & Westerfield, R., Jaffe, J., & Jordan, B. (2011). Corporate finance: Core principles and applications (3rd ed.). Boston, MD