A firm has current assets that could be sold for their book value of $10 million

Question

A firm has current assets that could be sold for their book value of $10 million. The book value of its fixed assets is $60 million, but they could be sold for $90 million today. The firm has total debt with a book value of $40 million, but interest rate declines have caused the market value of the debt to increase to $50 million. What is this firm’s market-to-book ratio? (Round your answer to 2 decimal places.)

A firm has current assets that could be sold for their book value of $10 million. The book value of its fixed assets is $60 million, but they could be sold for $90 million today. The firm has total debt with a book value of $40 million, but interest rate declines have caused the market value of the debt to increase to $50 million. What is this firm’s market-to-book ratio? (Round your answer to 2 decimal places.)

Explanation / Answer

Book Value of Current Assets=$ 10 m and Market Value =$ 10m

Book value of Fixed Assets=$ 60m and Market Value=$ 90 m

Book value of Debt =$ 40m and Market Value of Debt =$50

so the formula to find out Market to Book Ratio= Market Price/ Book value

so the Market To book Value of Current Assts= 10/10=1.00

Fixed Assets=90/60=1.50

Debt =50/40=1.25

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

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