In 2013 Caterpillar Inc. had about 653 million shares outstanding. Their book va

Question

In 2013 Caterpillar Inc. had about 653 million shares outstanding. Their book value was $32 per share, and the market price was $86.00 per share. The company’s balance sheet shows that the company had $20.7 billion of long-term debt, which was currently selling near par value.

a. What was Caterpillar’s book debt-to-value ratio? (Enter your answer as a decimal rounded to 2 decimal places. Do not round intermediate calculations.)

Book value

b. What was its market debt-to-value ratio? (Enter your answer as a decimal rounded to 2 decimal places. Do not round intermediate calculations.)

Market value

c. Which measure should you use to calculate the company’s cost of capital? Book value Market value

Explanation / Answer

Answer:a Book Debt to value ratio=Debt/Equity

=$20700 million/$(653*$32)

=20700/20896=0.99 times

Answer:b market debt-to-value ratio=Debt/Equity

=$20700 million/$(653*$86)

=20700/56158=0.37 times

Answer:c Market value

Related Questions

Navigate

• Browse (All)
• Browse I
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.