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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 8 months ago
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