Use to calculate the company cost of capital

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Reference no: EM131337975

In 2013 Caterpillar Inc. had about 758 million shares outstanding. Their book value was $40 per share, and the market price was $94.00 per share. The company’s balance sheet shows that the company had $33.5 billion of long-term debt, which was currently selling near par value.

a. What was Caterpillar’s book debt-to-value ratio? (Enter your answer as a decimal rounded to 2 decimal places. Do not round intermediate calculations.)

Book value _________

b. What was its market debt-to-value ratio? (Enter your answer as a decimal rounded to 2 decimal places. Do not round intermediate calculations.)

Market value __________

c. Which measure should you use to calculate the company’s cost of capital?

Book value

Market value

Reference no: EM131337975

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