In 2015, Caterpillar Inc. had about 665 million shares outstanding. Their book value was $41.3 per share, and the market price was $69.50 per share. The company’s balance sheet shows that the company had $28.50 billion of long-term debt, which was currently selling near par value.
a. What was Caterpillar’s book debt-to-value ratio?
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?
A) Book value
B) Market value