Question

Here is a simplified balance sheet for Locust Farming: Locust Farming Balance Sheet ($ in millions)...

Here is a simplified balance sheet for Locust Farming:

Locust Farming
Balance Sheet
($ in millions)
Current assets $ 42,541 Current liabilities $ 29,738
Long-term assets 46,866 Long-term debt 27,769
Other liabilities 14,351
Equity 17,549
Total $ 89,407 Total $ 89,407

Locust has 662 million shares outstanding with a market price of $100 a share.

a. Calculate the company’s market value added. (Enter your answers in millions.)

Market Value?

Market Value added?

b. Calculate the market-to-book ratio. (Round your answer to 2 decimal places.)

c. How much value has the company created for its shareholders as a percent of the investment of the equity holders?

Increase in value of equity _____%?

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Homework Answers

Answer #1

Part (a)

Market value of equity = Number of shares outstanding x Current share price = 662 mn x $ 100 = $ 66,200 mn

Market value added = Market value of equity - Book value of equity = 66,200 - 17,549 = $ 48,651 mn

Part (b)

Market value to book ratio = Market value of equity / Book value of equity = 66,200 / 17,549 = 3.77

Value the company has created for its shareholders as a percent of the investment of the equity holders = Market value Added / Book value of equity = 48,651 / 17,549 = 277.23%

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