Question

In: Finance

A firm has current assets that could be sold for their book value of $32 million....

A firm has current assets that could be sold for their book value of $32 million. The book value of its fixed assets is $70 million, but they could be sold for $100 million today. The firm has total debt with a book value of $50 million, but interest rate declines have caused the market value of the debt to increase to $60 million. What is the ratio of the market value of equity to its book value? (Round your answer to 2 decimal places.)

Market-to-book ratio ?

Solutions

Expert Solution

Formula Book Value (BV) Market Value (MV)
Current Assets (CA)                        32                      32
Fixed Assets (FA)                        70                    100
CA+FA Total assets (TA)                      102                    132
Debt (D)                        50                      60
TA - D Equity                        52                      72

Market value of equity to Book value ratio = 72/52 = 1.38

jeff jeffy answered 9 months ago
Next > < Previous

Related Solutions

KMS Corporation has assets with a market value of ​$522 ​million, ​$32 million of which are...
KMS Corporation has assets with a market value of ​$522 ​million, ​$32 million of which are cash. It has debt of ​$294 ​million, and 13 million shares outstanding. Assume perfect capital markets. a. What is its current stock​ price? b. If KMS distributes ​$32 million as a​ dividend, what will its share price be after the dividend is​ paid? c. If​ instead, KMS distributes ​$32 million as a share​ repurchase, what will its share price be once the shares are​...
a firm has total assets of 25 million TL. Its current assets is 10 million TL...
a firm has total assets of 25 million TL. Its current assets is 10 million TL and fixed assets (machinery, real estate etc) is 15 million TL. This firm’s financial leverage is %45. Firm has 1 500 000 total outstanding shares with 900 000 shares trading at the stock market and one share sells 10 TL in the stock market. What is the firm’s Price/Book ratio( PD/DD)? Calculate the expected stock price and market cap if the average Price/Book ratio...
Suppose the Schoof Company has this book value balance sheet: Current assets $30,000,000 Current liabilities $20,000,000...
Suppose the Schoof Company has this book value balance sheet: Current assets $30,000,000 Current liabilities $20,000,000 Fixed assets 70,000,000 Notes payable $10,000,000 Long-term debt 30,000,000 Common stock (1 million shares) 1,000,000 Retained earnings 39,000,000 Total assets $100,000,000 Total liabilities and equity $100,000,000 The notes payable are to banks, and the interest rate on this debt is 11%, the same as the rate on new bank loans. These bank loans are not used for seasonal financing but instead are part of...
Suppose the Schoof Company has this book value balance sheet: Current assets $30,000,000 Current liabilities $20,000,000...
Suppose the Schoof Company has this book value balance sheet: Current assets $30,000,000 Current liabilities $20,000,000 Notes payable 10,000,000 Fixed assets 70,000,000 Long-term debt 30,000,000 Common stock (1 million shares) 1,000,000 Retained earnings 39,000,000 Total assets $100,000,000 Total liabilities and equity $100,000,000 The notes payable are to banks, and the interest rate on this debt is 10%, the same as the rate on new bank loans. These bank loans are not used for seasonal financing but instead are part of...
Suppose the Schoof Company has this book value balance sheet: Current assets $30,000,000 Current liabilities $20,000,000...
Suppose the Schoof Company has this book value balance sheet: Current assets $30,000,000 Current liabilities $20,000,000 Fixed assets 70,000,000 Notes payable $10,000,000 Long-term debt 30,000,000   Common stock (1 million shares) 1,000,000 Retained earnings 39,000,000 Total assets $100,000,000 Total liabilities and equity $100,000,000 The notes payable are to banks, and the interest rate on this debt is 9%, the same as the rate on new bank loans. These bank loans are not used for seasonal financing but instead are part of...
Suppose the Schoof Company has this book value balance sheet: Current assets $30,000,000 Current liabilities $20,000,000...
Suppose the Schoof Company has this book value balance sheet: Current assets $30,000,000 Current liabilities $20,000,000 Notes payable 10,000,000 Fixed assets 70,000,000 Long-term debt 30,000,000 Common stock (1 million shares) 1,000,000 Retained earnings 39,000,000 Total assets $100,000,000 Total liabilities and equity $100,000,000 The notes payable are to banks, and the interest rate on this debt is 10%, the same as the rate on new bank loans. These bank loans are not used for seasonal financing but instead are part of...
Suppose the Company has this book value balance sheet: Current assets $30,000,000 Current liabilities $20,000,000 Fixed...
Suppose the Company has this book value balance sheet: Current assets $30,000,000 Current liabilities $20,000,000 Fixed assets 70,000,000 Notes payable $10,000,000 Long-term debt 30,000,000   Common stock (1 million shares) 1,000,000 Retained earnings 39,000,000 Total assets $100,000,000 Total liabilities and equity $100,000,000 The notes payable are to banks, and the interest rate on this debt is 11%, the same as the rate on new bank loans. These bank loans are not used for seasonal financing but instead are part of the...
Suppose the Schoof Company has this book value balance sheet: Current assets $30,000,000 Current liabilities $20,000,000...
Suppose the Schoof Company has this book value balance sheet: Current assets $30,000,000 Current liabilities $20,000,000 Fixed assets 70,000,000 Notes payable $10,000,000 Long-term debt 30,000,000   Common stock (1 million shares) 1,000,000 Retained earnings 39,000,000 Total assets $100,000,000 Total liabilities and equity $100,000,000 The notes payable are to banks, and the interest rate on this debt is 7%, the same as the rate on new bank loans. These bank loans are not used for seasonal financing but instead are part of...
Suppose the School Company has this book value balance sheet: Current assets $30,000,000 Current liabilities $20,000,000...
Suppose the School Company has this book value balance sheet: Current assets $30,000,000 Current liabilities $20,000,000 Fixed assets 70,000,000 Notes payable $10,000,000 Long-term debt 30,000,000 Common stock (1 million shares) 1,000,000 Retained earnings 39,000,000 Total assets $100,000,000 Total liabilities and equity $100,000,000 The notes payable are to banks, and the interest rate on this debt is 7%, the same as the rate on new bank loans. These bank loans are not used for seasonal financing but instead are part of...
Suppose the Schoof Company has this book value balance sheet: Current assets $30,000,000 Current liabilities $20,000,000...
Suppose the Schoof Company has this book value balance sheet: Current assets $30,000,000 Current liabilities $20,000,000 Fixed assets 70,000,000 Notes payable $10,000,000 Long-term debt 30,000,000 Common stock (1 million shares) 1,000,000 Retained earnings 39,000,000 Total assets $100,000,000 Total liabilities and equity $100,000,000 The notes payable are to banks, and the interest rate on this debt is 8%, the same as the rate on new bank loans. These bank loans are not used for seasonal financing but instead are part of...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT