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Kaye's Kitchenware has a market/book ratio equal to 1. Its stock price is $12 per share...

Kaye's Kitchenware has a market/book ratio equal to 1. Its stock price is $12 per share and it has 4.6 million shares outstanding. The firm's total capital is $140 million and it finances with only debt and common equity. What is its debt-to-capital ratio? Round your answer to two decimal places.

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Expert Solution

Total book value of equity=(12*4.6)=$55.2 million

market/book ratio=Market value/Book value

Hence Market value of equity=$55.2 million

Total capital=debt+equity

debt=(140-55.2)=$84.8 million

Hence debt to capital ratio=debt/Total capital

=84.8/140

=0.61 (or 60.57% (Approx)

jeff jeffy answered 2 years ago
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