Mini-Case Hewlett-Packard Co. Balance Sheet (October 31, Hewlett-Packard Company 2007) Balance Sheet, October 31, 2007 On September 27, 2007, Apple Inc. (AAPL) reported the following sources of financing in its balance sheet: Apple Inc. Balance Sheet, September 27, 2007 Hewlett-Packard Company Income Statements (\$ thousands) Moreover, the firm's 2007 income statement reported earnings of $3.496 billion with no interest expense: Apple Inc. Income Statements ( $ thousands) a. Describe the capital structure of Hewlett-Packard using both the debt ratio and the interest-bearing debt ratio. b. What is Hewlett-Packard's times interest earned ratio? If the company faces a principal payment equal to $3 billion, what is its EBITDA coverage ratio for 2007? (Hint: Hewlett-Packard's tax rate is 20 percent.) c. Suppose Apple has decided to issue debt financing and use If Apple's management had been considering the possibility the proceeds to purchase some of its shares of stock from the open market. What fraction of the firm's 2.47 billion of using debt financing for the first time, it might have looked at Hewlett-Packard Company (HPQ) as a benchmark firm for shares does the firm need to repurchase in order to make its comparison purposes. Hewlett-Packard used debt financing as interest-bearing debt ratio equal to that of Hewlett-Packard? shown on the following balance sheet and income statement: If Apple had carried out the transaction by issuing bonds with an 8 percent rate of interest, what would its earnings per share have been in 2007 ? d. Do you think that Apple's proposed change of capital structure makes good financial sense? Why or why not