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:

Variable Costs

Expenses that change in proportion to the amount of goods produced or the extent of services rendered.

Sales Quantity

The total number of units of a product sold in a particular period.

Fixed Costs

Expenses that are constant in total, regardless of changes in the volume of activity within a relevant period.

Total Fixed Cost

Total fixed cost is an accounting term describing the sum of all expenses within a company that do not change with the level of production or sales, such as rent, salaries, and insurance.