BARUCH FUND OF CORPORATE FIN. W/CONNECT
BARUCH FUND OF CORPORATE FIN. W/CONNECT
10th Edition
ISBN: 9781264531820
Author: BREALEY
Publisher: MCG CUSTOM
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Chapter 4, Problem 1QP

a.

Summary Introduction

To calculate: The added market value.

a.

Expert Solution
Check Mark

Explanation of Solution

Computation of the market value added:

Market value=Shares outstanding×Market price per share=$657 million×$83=$54,531 million

Market value added=Market valueEquity=$54,531$17,532=$36,999

Hence, the market value added is $36.999.

b.

Summary Introduction

To compute: The market to book ratio.

b.

Expert Solution
Check Mark

Explanation of Solution

Computation of the market to book ratio:

Market to book ratio=Market value Equity=54,53117,532=3.11

Hence, the market to book ratio is 3.11.

c.

Summary Introduction

To discuss: The value created by the company for the shareholders as a percent of the equity to the shareholders.

c.

Expert Solution
Check Mark

Explanation of Solution

The company has maximized the value of the investment in equity by $36,999 million that is 211% of the equity of shareholders on the balance sheet.

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