Question

24) Dippy Donuts’ total assets equal $17 million. Its book value of equity is $7 million....

24) Dippy Donuts’ total assets equal $17 million. Its book value of equity is $7 million. Excess cash is $150,000. The market value of equity is $10 million and Debt to Enterprise Value ratio is 50%. What is the book value of Dippy’s interest bearing debt?

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Answer #1

We can calculate the book value of debt as follows

Total Assets = $ 17,000,000

Book Value of Equity = $ 7,000,000

As we are aware of the the formula that is

Total Assets = Total Equity + Total Liabilities

So the debt value can be calculated as below

Total liabilities = Total Assets - Total Equity

= 17,000,000 - 7,000,000

= $ 10,000,000

Therefore the book value of Dippy's interest bearing debt comes out to be $ 10,000,000.

Hope I am able to solve your concern. If you are satisfied hit a thumbs up !!

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