A firm has current assets that could be sold for their book value of $24 million
ID: 2761118 • Letter: A
Question
A firm has current assets that could be sold for their book value of $24 million. The book value of its fixed assets is $62 million, but they could be sold for $92 million today. The firm has total debt with a book value of $42 million, but interest rate declines have caused the market value of the debt to increase to $52 million. What is the ratio of the market value of equity to its book value? (Round your answer to 2 decimal places.)
A firm has current assets that could be sold for their book value of $24 million. The book value of its fixed assets is $62 million, but they could be sold for $92 million today. The firm has total debt with a book value of $42 million, but interest rate declines have caused the market value of the debt to increase to $52 million. What is the ratio of the market value of equity to its book value? (Round your answer to 2 decimal places.)
Explanation / Answer
Market to book of equity = (current assets+market value of fixed assets-market value of debt)/(current assets+book value of fixed assets-book value of debt)
=(24+92-52)/(24+62-42) = 1.45
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