Question

6.

In December 2015 2015​, General Electric​ (GE) had a book value of equity of $98.4 ​billion, 9.4 billion shares​ outstanding, and a market price of $31.32 per share. GE also had cash of $101.1 ​billion, and total debt of $199.4 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?

Answer 1

a. GE's market capitalization is computed as shown below:

= Number of shares outstanding x market price per share

= 9.4 billion x $ 31.32

= $ 294.408 billion

GE's market to book ratio is computed as follows:

= Market capitalization / book value of equity

= $ 294.408 billion / $ 98.4 billion

= 2.99 Approximately

b. GE's book debt-equity ratio is computed as follows:

= Total debt / book value of equity

= $ 199.4 billion / $ 98.4 billion

= 2.03 Approximately

GE's market debt-equity ratio is computed as follows:

= Total debt / Market capitalization

= $ 199.4 billion / $ 294.408 billion

= 0.68 Approximately

c. GE's enterprise value is computed as shown below:

= Market capitalization + Total debt - cash

= $ 294.408 billion + $ 199.4 billion - $ 101.1 billion

= $ 392.708 billion

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