In 2015, Caterpillar Inc. had about 653 million shares outstanding. Their book value was $32.3 per share, and the market price was $74.00 per share. The company’s balance sheet shows that the company had $20.20 billion of long-term debt, which was currently selling near par value.
a. What was Caterpillar’s book debt-to-value ratio? Book Value______?
b. What was its market debt-to-value ratio? Market value_______?
c. Which measure should you use to calculate the company’s cost of capital?
Book value or
Market value