E3.7. The Method of comparables: Dell, Inc. (Easy) Here are some accounting numbers and market values (in millions) for Hewlett-Packard and Gateway for 2002. These two computer manufactures are considered to be compara bles for Dell, Inc. Book Hewlett-Packard Co. Sales $45,225 Earnings Value Market Value Gateway, Inc. 6,080 $624 (1,290) $13,953 $32,963 1,565 1,944

a. Calculate price-to-sales, price-earnings (P/E), and price-to-book (P/B) ratios for Hewlett-Packard and Gateway.

b. Dell reported the following number for fiscal year 2002: Sales Earnings $31,168 million $ 1,246 milion Book value $ 4,694 million Apply multiples for Hewlett-Packard and Gateway to price Dell's 2,602 million out- standing shares. What difficulties did you encounter? Real World Connection See exercises E3.14, E5.11, E8.12, E13.16, and E19.4 and Minicases M10.1 and M15.2.