I need you to change the wordings so turnitin doesn’t catch it. It should be paraphrased well. Numbers and figures need to be the same, but you can change them from one place to other place so that it doesn’t show any plagiarism. See attached file.FIN516: Week 2 Mini Case Assignment
1. What is the name of the company? What is the industry sector?
Google is an American multinational technology company specializing in Internet-related
services and products. These include online advertising technologies, search, cloud computing,
and software. As a multi-billion dollar company, Google Inc. is one of the leading computer
search engines in the world and is continuing to grow as the front-runner in the informational
technology industry.
2. What are the operating risks of the company?
Within business, there will always be operational risks to consider. The operating risks for
Google Inc. include internal fraud, destruction of company property, and quality of goods.
Internal fraud is common in almost all industries and the same is true for the IT industry. Google
Inc. is no exception to this type of operating risk, especially because of how much Google Inc. is
worth. According to Forbes, the net worth of Google Inc. at the end of 2014 was $56.6B. With
profit so high, there is always a risk that employees could defraud the company for their own
personal benefits. Another potential operating risk for Google Inc. is destruction of company’s
property. Being in the IT industry, the equipment usage can be an expensive. The amount of
equipment, both hardware and software, is high and in case if the employees are destructive of
company’s property, the cost to repair or replace such equipment could be substantial. Lastly, the
quality of goods produced from Google must meet industry standards. If Google Inc. falls below
the industry standards, the company can become financially vulnerable. In a competitive market,
it is important for Google Inc. to maintain a level of excellence and strive to stay at the top of
the IT industry. With technology still booming, it is necessary financially for Google Inc.
to continue serving the public to the best of the ability. If the public becomes discouraged with
Google Inc.’s products, there is potential risk in losing profit in the future.
FIN516: Week 2 Mini Case Assignment
3. What is the financial risk of the company (the debt to total capitalization ratio)?
Ratio = Debt/Stockholders Equity
The total debt for Google Inc. after the end of September 2015 is $28.04M and the total
stockholders’ equity is $116.24M.
(http://finance.yahoo.com/q/bs?s=GOOG+Balance+Sheet&annual, 2016)
4. Does the company have any preferred stock?
Google Inc. does not have any preferred stock according to the balance sheet. The Stockholders
Equity is a combination of common stock, retained earnings, and other stockholder
equity. (http://finance.yahoo.com/q/bs?s=GOOG+Balance+Sheet&annual, 2016)
5. What is the capital structure of the company: short-term portion of long-term debt,
long-term debt, preferred stock (if any), and market value of common stock issued
and outstanding?
(http://quicktake.morningstar.com/back_soon.html?aspxerrorpath=/stocknet/bonds.aspx, 2016)
FIN516: Week 2 Mini Case Assignment
6. What is the company’s current actual beta?
Google Inc.’s actual beta is 0.89. (https://www.google.com/finance?cid=694653, 2016)
7. What would the beta of this company be if it had no long-term debt in its capital
structure?
Beta with no long-term debt = 0.89/[1+(1-40%)*(22/78)] = 0.89/[1+(60%)*(0.28)] = 0.89/1.168
= 0.76
8. What is the company’s current marginal tax rate?
The current Marginal Tax Rate for Google Inc. is 40%. This marginal tax rate was
determined from tax tables.
(http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/countrytaxrate.htm, 2016)
9. What is the cost of debt before and after taxes?
Before tax debt = $56.6 * 18.47% = $10.45B / (1-0.40) = $17.42
Before tax debt = $17.42B / $56.6B = 0.3077 * 100 = 30.77%
After tax debt = Rd(1-T)Rd = $28.04B / $56.6B = 0.4954 * 100 = 49.54%rd = 49.54% (1-0.40) =
0.2972 * 100 = 29.72%
10. What is the cost of preferred stock (if any)?
Google Inc. does not have Preferred Stock and therefore will not have a Cost of Preferred Stock.
11. What is the cost of equity?
Cost of equity = Dividends per share / Current market value of stock.
I checked two different websites and there were no dividends listed. As a result, the current
market value of stock will not change.
FIN516: Week 2 Mini Case Assignment
(https://www.google.com/finance?cid=694653,2016)
(http://finance.yahoo.com/q/bs?s=GOOG+Balance+Sheet&annual, 2016)
12. What is the cash dividend yield on the common stock?
Dividends = Net Income – Equity Financing
Dividend Payout Ratio = Dividends / Net Income
Unable to determine due to no equity financing listed on Google’s financials.
(http://finance.yahoo.com/q/bs?s=GOOG+Balance+Sheet&annual, 2016)
13. What is the weighted average cost of capital of the company?
WACC = (rd)(1-T)+(D/V)+re(E/V) = 0(1-18.47%)+(5.237B/48.2B)+11.24(47.75B/48.28B)
WACC = 11.12%
14. What is the price earnings multiple of the company?
The price earnings multiple of the company = price of a share / earnings per share = $694.45 /
$4.93 = $140.86
15. How has the company’s stock been performing in the last 5 years?
Within the past five years, Google Inc. stock has risen significantly. Its value has approximately
tripled with steady increases throughout the five years span in spite of the decrease in the end of
2008. Within the last year, even though the stock has dropped slightly, Google Inc. remains a
solid choice for investment. Since the IT industry continues to grow, looking forward, Google
Inc. stock will continue to increase in value.
16. How would you assess the overall risk structure of the company in terms of its
operating risks and financial risk (debt to capitalization ratio)?
FIN516: Week 2 Mini Case Assignment
With the Debt to Equity Ratio being low, the overall risk structure is minor. Operating risks exist
within every organization. However, looking at the statistics as a whole, Google Inc. is
successful in maintaining its current operational risks. Google Inc. is a profound and growing
company and therefore, the operating risks will not be crucial in the upcoming years. Financially,
Google Inc. has a low Debt to Equity Ratio (9.77%) and beta (1.15). With Google Inc.’s net
worth at $55.80B, the company has the ability to take on some additional debt if needed.
17. Would you invest in this company? Why or why not?
Over the last five years, the company has significantly increased its stock performance and will
continue to expand. The industry as a whole is still growing and Google Inc. will continue to
compete for the top ranking companies in IT industry. If investing, I would closely monitor
Google Inc.’s Debt to Equity Ratio to determine if the company is using the debt to its advantage
in order to increase profit. I would also look at other costs, and focus on the P/E Ratio to insure
that I was earning the maximum profit since Google Inc. is an established company.
In conclusion, the financial review of Google Inc. shows that the company is financially secure
and is expanding. I would strongly recommend invest in Google Inc.
FIN516: Week 2 Mini Case Assignment
18. Bibliography
1. https://en.wikipedia.org/wiki/Google
2. http://thatswacc.com/wacc-formula.php
3. http://finance.yahoo.com/q/bs?s=GOOG+Balance+Sheet&annual
4. https://www.google.com/finance?cid=694653
5. http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/countrytaxrate.htm
6. http://quicktake.morningstar.com/back_soon.html?aspxerrorpath=/stocknet/bonds.aspx
7. http://www.taxpolicycenter.org/taxfacts/content/pdf/corporate_rates.pdf
8. http://www.hngn.com/articles/48467/20141106/apple-tops-forbes-valuable-brand-list
9. http://www.garp.org/media/673303/operational%20risk%20slides.pdf

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