In 2015, Caterpillar Inc. had about 759 million shares outstanding. Their book value was $35.0 per share, and the market price was $94.50 per share. The company’s balance sheet shows that the company had $32.50 billion of long-term debt, which was currently selling near par value.
a. What was Caterpillar’s book debt-to-value ratio? (Do not round intermediate calculations. Enter your answer as a decimal rounded to 2 decimal places.)
b. What was its market debt-to-value ratio? (Do not round intermediate calculations. Enter your answer as a decimal rounded to 2 decimal places.)
c. Which measure should you use to calculate the company’s cost of capital?
Book value
Market value