In 2018, Caterpillar Inc. had about 595 million shares outstanding. Their book value was $23.00 per share,

Question:

In 2018, Caterpillar Inc. had about 595 million shares outstanding. Their book value was $23.00 per share, and the market price was $154.80 per share. The company’s balance sheet shows that the company had $24.8 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?

c. Which of these two measures should you use to calculate the company’s cost of capital?

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...

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