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In December 2015​, General Electric​ (GE) had a book value of equity of $ 98.5 ​billion,...

In December 2015​, General Electric​ (GE) had a book value of equity of $ 98.5 ​billion, 9.6 billion shares​ outstanding, and a market price of $ 29.36 per share. GE also had cash of $ 103.6 ​billion, and total debt of $ 196.3 billion. a. What was​ GE's market​ capitalization? What was​ GE's market-to-book​ ratio? b. What was​ GE's book​ debt-equity ratio? What was​ GE's market​ debt-equity ratio? c. What was​ GE's enterprise​ value?

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Homework Answers

Answer #1

Answer to Part a.

Market Capitalization = Market Price per Share * Shares Outstanding
Market Capitalization = $29.36 * 9.6 Billion
Market Capitalization = $281.856 Billion

Market to Book ratio = Market Capitalization / Book Value of Equity
Market to Book ratio = $281.856 / $98.5
Market to Book ratio = 2.86 times

Answer to Part b.

Book Debt- Equity Ratio = Book Value of Debt / Book Value of Equity
Book Debt- Equity Ratio = $196.30 / $98.50
Book Debt- Equity Ratio = 1.99 times

Market Debt – Equity Ratio = Value of Debt / Market Capitalization
Market Debt – Equity Ratio = $196.30 / $281.856
Market Debt – Equity Ratio = 0.70 times

Answer to Part c.

Enterprises Value = Market Capitalization + Debt – Cash
Enterprises Value = $281.856 Billion + $196.3 Billion - $103.6 Billion
Enterprises Value = $374.556 Billion

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