Ready-Parts and Advance Auto Parts Case Study

You are working as a consultant for Ready-Parts Stores(RPS), a growing auto parts retailer, RPS was founded eight years ago by Jim and Belinda Bird and their family. The Birds started in the retail auto parts business over 20 years ago, originally working for other companies. RPS now owns a regional chain of 35 stores, primarily in the Midwest and Southeastern United States. RPS has been innovative in providing parts for newer types of vehicles, including hybrids and pure electric vehicles. In addition, RPS carries the latest Advanced Driver Assistance System(ADAS) add-on equipment kits.

The company wants to expand across the U.S. and Canada. Such a move would require substantial investments in warehouses, delivery vehicles and other infrastructure. Relatively little formal analysis has been used in its capital budgeting process. For example, the company has never attempted to determine its cost of capital, and the Birds would like you to perform the analysis. Jim and Belinda want you to use the pure play approach to estimate the cost of capital for RPS, and after some discussion, you agree that Advance Auto Parts would be a representative company.

Questions

1. Find the most recent 10-Q or 10-K for Advance Auto Parts, Inc. (ticker: "AAP"). Using the balance sheet, what is the book value of long-term debt and the book value of equity?

Assets December 28, 2019 December 29, 2018 $ $ Current assets: Cash and cash equivalents Receivables, net Inventories Other current assets Total current assets Property and equipment, net of accumulated depreciation of $2,037,849 and $1,918,502 Operating lease right-of-use assets Goodwill Intangible assets, net Other assets 418,665 689,469 4,432,168 155,241 5,695,543 1,433,213 2,365,325 992,240 709,756 52,448 11,248,525 896,527 624,972 4,362,547 198,408 6,082,454 1,368,985 990,237 550,593 48,379 9,040,648 $ $ Liabilities and Stockholders' Equity $ 3,421,987 535,863 519,852 4,477,702 747,320 2,017,159 334,013 123,250 3,172,790 623,141 90,019 3,885,950 1,045,720 318,353 239,812 Current liabilities: Accounts payable Accrued expenses Other current liabilities Total current liabilities Long-term debt Noncurrent operating lease liabilities Deferred income taxes Other long-term liabilities Commitments and contingencies Stockholders' equity: Preferred stock, nonvoting, $0.0001 par value, 10,000 shares authorized; no shares issued or outstanding Common stock, voting, $0.0001 par value, 200,000 shares authorized; 76,051 shares issued and 69,232 outstanding at December 28, 2019 75,831 shares issued and 72,460 outstanding at December 29, 2018 Additional paid-in capital Treasury stock, at cost, 6,819 and 3,371 shares Accumulated other comprehensive loss Retained earnings Total stockholders' equity 8 735,183 (924,389) (34,569) 3,772,848 3,549,081 11,248,525 694,797 (425,954) (44,193) 3,326,155 3,550,813 9,040,648 $