Question

In December 2015​, General Electric​ (GE) had a book value of equity of $ 98.2 ​billion, 9.6 billion shares​ outstanding, and a market price of $ 28.32 per share. GE also had cash of $ 103.4 ​billion, and total debt of $ 199.1 billion.
A. What was​ GE's market​ capitalization? What was​ GE's market-to-book​ ratio?
B. What was​ GE's book​ debt-equity ratio? What was​ GE's market ​debt-equity ratio?
C. What was​ GE's enterprise​ value?

Answer 1

Answer:

A. Market capitalization =$272 billion

Market-to-book ratio=2.76%

B.Book​ debt-equity ratio=2.02%

Market ​debt-equity ratio=0.731

C.GE's enterprise​ value=$367.7 billion

Explanation:

A. Computation for GE's market​ capitalization

Using this formula

($billion)

Market capitalization= Share outstanding*Market price per share

Let plug in the formula

9.6 billion*$ 28.32 per share

Market capitalization =$272

Computation for GE's market-to-book​ ratio

Using this formula

Market-to-book​ ratio=Market capitalization /book value of equity

Let plug in the formula

Market-to-book​ ratio=$272/$98.2 billion

Market-to-book ratio=2.76%

B. Computation for GE's book​ debt-equity ratio

Using this formula

Book​ debt-equity ratio=Total debt /book value of equity

Let plug in the formula

Book​ debt-equity ratio=$ 199.1 billion/$98.2

Book​ debt-equity ratio=2.02%

Computation for market ​debt-equity ratio

Market ​debt-equity ratio

=Total debt/Market Capitalization

Let plug in the formula

Market ​debt-equity ratio=$199.1 billion/272

Market ​debt-equity ratio=0.731

C. Computation for GE's enterprise​ value

Using this formula

GE's enterprise​ value= Market capitalization +Total debt -Cash

Let plug in the formula

GE's enterprise​ value=$272+$199.1-$ 103.4

GE's enterprise​ value=$367.7 billion