In 2013 Caterpillar Inc. had about 655 million shares outstanding. Their book value was $34 per share, and the market price was $87.00 per share. The company’s balance sheet shows that the company had $18.7 billion of long-term debt, which was currently selling near par value.
a. What was Caterpillar’s book debt-to-value ratio? (Enter your answer as a decimal rounded to 2 decimal places. Do not round intermediate calculations.)
Book value
b. What was its market debt-to-value ratio? (Enter your answer as a decimal rounded to 2 decimal places. Do not round intermediate calculations.)
Market value
c. Which measure should you use to calculate the company’s cost of capital?
Book value