Question

Goodyear Trucking Inc. has 582 million common shares outstanding. The book value per share is $...

Goodyear Trucking Inc. has 582 million common shares outstanding. The book value per share is $ 15.35 and the current price is $65 per share. Goodyear has $ 15 billion in long- term debt which is currently selling at par value.

A) What is Goodyear's book debt- to- value ratio?

B) What is its market debt-to-value ratio?

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Answer #1
Ans A) What is Goodyear's book debt- to- value ratio?
Debt to value ratio = Book value of debt/Book value of firm
=15/(15+0.582*15.35)
         0.63
Ans B) What is its market debt-to-value ratio?
Debt to value ratio = Market value of debt/Market value of firm
=15/(15+0.582*65)
         0.28
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