Question

In December

20152015​,

General Electric​ (GE) had a book value of equity of

$ 97.3$97.3

​billion,

9.59.5

billion shares​ outstanding, and a market price of

$ 31.48$31.48

per share. GE also had cash of

$ 101.9$101.9

​billion, and total debt of

$ 199.4$199.4

billion.

a. What was​ GE's market​ capitalization? What was​ GE's market-to-book​ ratio?

b. What was​ GE's book​ debt-equity ratio? What was​ GE's market​ debt-equity ratio?

c. What was​ GE's enterprise​ value?

Answer 1

(a). GE's market capitalization & GE's market-to-book ratio

GE's market capitalization

GE's market capitalization = Number of shares x Market Price per share

= 9.50 Billion Shares x $31.48 per share

= $299.06 Billion

GE's market-to-book ratio

GE's market-to-book ratio = Market capitalization / Book Value of Equity

= $299.06 Billion / $97.30 Billion

= 3.07

(b)-GE's book debt-equity ratio & GE's market debt-equity ratio

GE's book debt-equity ratio

GE's book debt-equity ratio = Book value of Debt / Book value of Equity

= $199.40 Billion / $97.30 Billion

= 2.05

GE's market debt-equity ratio

GE's market debt-equity ratio = Book value of Debt / GE's market capitalization

= $199.40 Billion / $299.06 Billion

= 0.67

(c)-GE's enterprise value

GE's enterprise value = GE's market capitalization + Book value of Debt + Cash

= $299.06 Billion + $199.40 Billion + $101.90 Billion

= $396.56 Billion