Reference no: EM132273480

This comprehensive problem uses a case study of a real Fortune 500 Corporation to help understand the uses of different types of corporate financing methods.

The paper must be typed using a word processor. Use Times New Roman size 12 font. Illustrations for questions 2 and 4 should be completed using Excel. Use a proper title page, body, and citations page. If you choose, you may put all illustrations at the end on appendix pages.

The company we are using is GameStop Corp, listed as GME on the NYSE. Using the supplied information and referring to the corporate website or other sources as necessary, complete a research paper answering all of the questions below.

In 2016 GameStop Corp did not have an issue of preferred stock. In 2016 GameStop Corp called their bonds Senior Notes.
In 2016 GameStop Corp operated 7,117 locations. In 2016 GameStop Corp stated

Maximize brick and mortar stores. Our strategy regarding our retail stores includes growing our leading market share in video games, utilizing our stores to grow digital sales and applying our retail expertise to our Technology Brands businesses. Our growth strategy depends in part upon opening new stores and operating them profitably. We expect to open approximately 140 new stores in fiscal 2016, including 90 Video Game Brands stores (including 84 collectibles stores) and 50 Technology Brands stores. Our strategy also includes closing stores which are not meeting our performance standards or stores at the end of their lease terms and transferring sales to other nearby GameStop locations. We plan to close approximately 200 Video Game Brands stores worldwide in fiscal 2016.

How did they do?
GameStop Corp is in the position of having to determine how to capitalize their new locations. The 2017 GameStop Corp Annual Report is available at Gamestop Corporation.

Use the data from the 2017 GameStop Corp Annual Report to analyze how the different methods available in capitalizing would affect the company.

Complete or answer the following questions.

1. If GameStop Corp chose to issue another round of corporate bonds, how much interest rate should they offer?

2. Assume that GameStop Corp did issue corporate bonds at your determined bond interest rate. Also assume they used bonds for 30% of their 2016 capitalization. By issuing 30% of their 2016 capitalization in bonds, what difference would result in the earnings per share of common stock? Illustrate using Excel.

3. Would you recommend changing a percentage of their unsecured borrowing to issuing bonds?

4. Would you recommend adding an issue of preferred stock to their financing? If you do, how many shares should they sell, and what should be the selling price? Illustrate using Excel.