A company has current assets that could be sold for their book value of $30 million. The book value of its fixed assets is $80 million, but they could be sold for $120 million today. The company has total debt with a book value of $50 million, but interest rate changes have caused the market value of the debt to increase to $60 million. What is the ratio of the market value of equity to its book value?
A company has current assets that could be sold for their book value of $30 million. The book value of its fixed assets is $80 million, but they could be sold for $120 million today. The company has total debt with a book value of $50 million, but interest rate changes have caused the market value of the debt to increase to $60 million. What is the ratio of the market value of equity to its book value?
Chapter3: Evaluation Of Financial Performance
Section: Chapter Questions
Problem 8P
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Transcribed Image Text:A company has current assets that could be sold
for their book value of $30 million. The book
value of its fixed assets is $80 million, but they
could be sold for $120 million today. The company
has total debt with a book value of $50 million,
but interest rate changes have caused the market
value of the debt to increase to $60 million. What
is the ratio of the market value of equity to its
book value?
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