A Company Has a Share Price of $24

question 38

Multiple Choice

A company has a share price of $24.50 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)$1.5 billion
• B)$2.8 billion
• C)$3.6 billion
• D)$4.3 billion
• E)$2.9 billion

---

Definitions:

Fair Value

The sum fetched from the sale of an asset or spent on the transition of a liability in a smooth transaction involving market participants at the time of assessment.

Foreign Currency Nonmonetary Assets

Assets that are not in cash and are not expected to be converted into cash in the near future, valued in a currency other than the entity's functional currency.

Historic Rate

The exchange rate at which a transaction was executed in the past, used for recording foreign currency transactions in financial statements.

Non-Free-Standing Subsidiaries

Entities that are significantly controlled or wholly owned by another firm but lack the independent structure or operations typically associated with subsidiary companies.