Consider the table shown below to answer the question posed in part a. Parts b and c are independent of the given table. Number of Share (millions) × Stock Price = Market Capitalization ($ millions) Callaway Golf (ELY) 94.6 × $ 16.36 = $ 1547.66 Alaska Air Group (ALK) 123.4 × $ 61.96 = $ 7645.86 Yum! Brands (YUM) 332.5 × $ 85.13 = $ 28,305.73 Caterpillar Tractor (CAT) 147.4 × $ 597.63 = $ 88,090.66 Microsoft (MSFT) 7,705.0 × $ 91.27 = $ 703,235.35 a. The price of Yum! Brands stock has risen to $185. What is the market value of the firm’s equity if the number of outstanding shares does not change? (Enter your answer in billions rounded to 3 decimal places.) b. The rating agency has revised Catalytic Concepts’ bond rating to BBB (use Table 2.2). What interest rate, approximately, would the company now need to pay on its bonds? (Enter your answer as a percent rounded to 1 decimal place.)
Consider the table shown below to answer the question posed in part a. Parts b and c are independent of the given table. Number of Share (millions) × Stock Price = Market Capitalization ($ millions) Callaway Golf (ELY) 94.6 × $ 16.36 = $ 1547.66 Alaska Air Group (ALK) 123.4 × $ 61.96 = $ 7645.86 Yum! Brands (YUM) 332.5 × $ 85.13 = $ 28,305.73 Caterpillar Tractor (CAT) 147.4 × $ 597.63 = $ 88,090.66 Microsoft (MSFT) 7,705.0 × $ 91.27 = $ 703,235.35 a. The price of Yum! Brands stock has risen to $185. What is the market value of the firm’s equity if the number of outstanding shares does not change? (Enter your answer in billions rounded to 3 decimal places.) b. The rating agency has revised Catalytic Concepts’ bond rating to BBB (use Table 2.2). What interest rate, approximately, would the company now need to pay on its bonds? (Enter your answer as a percent rounded to 1 decimal place.)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Problem 2-18 Functions of Financial Markets (LO3)
Consider the table shown below to answer the question posed in part a. Parts b and c are independent of the given table.
| Number of Share (millions) |
× | Stock Price | = | Market Capitalization ($ millions) |
||||||||||
| Callaway Golf (ELY) | 94.6 | × | $ | 16.36 | = | $ | 1547.66 | |||||||
| Alaska Air Group (ALK) | 123.4 | × | $ | 61.96 | = | $ | 7645.86 | |||||||
| Yum! Brands (YUM) | 332.5 | × | $ | 85.13 | = | $ | 28,305.73 | |||||||
| Caterpillar Tractor (CAT) | 147.4 | × | $ | 597.63 | = | $ | 88,090.66 | |||||||
| Microsoft (MSFT) | 7,705.0 | × | $ | 91.27 | = | $ | 703,235.35 | |||||||
a. The price of Yum! Brands stock has risen to $185. What is the market value of the firm’s equity if the number of outstanding shares does not change? (Enter your answer in billions rounded to 3 decimal places.)
b. The rating agency has revised Catalytic Concepts’ bond rating to BBB (use Table 2.2). What interest rate, approximately, would the company now need to pay on its bonds? (Enter your answer as a percent rounded to 1 decimal place.)
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