A Company Has a Share Price of $22

question 42

Multiple Choice

A company has a share price of $22.15 and 118 million shares outstanding. Its market-to-book ratio is 4.2, its book debt-equity ratio is 3.2, and it has cash of $800 million. How much would it cost to take over this business assuming you pay its enterprise value?

• A) $1.9 billion
• B) $3.044 billion
• C) $4.566 billion
• D) $3.8 billion

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Definitions:

Economic

Pertaining to the production, distribution, and consumption of goods and services, as well as the study of how societies utilize limited resources to fulfill wants and needs.

Competitive Advantage

The unique attribute or attributes a company has that enable it to outperform its competitors.

Strategic Thinking

The process of analyzing critical factors and variables that will influence the long-term success of a business, then mapping out actions to achieve desired goals.

Industry Attractiveness

A measure of the potential profitability and prospects for growth within a particular industry or market sector.