Use the table for the question(s)below.
Consider the following balance sheet:
-Luther Corporation's stock price is $39 per share and the company has 20 million shares outstanding.Its excess cash in 2019 is $23.4 million.Its Debt-to-Enterprise Value Ratio in 2019 is closest to:
A)0.696.
B)0.37.
C)0.255.
D)0.654.

Question

Use the table for the question(s)below.
Consider the following balance sheet:  
-Luther Corporation's stock price is $39 per share and the company has 20 million shares outstanding.Its excess cash in 2019 is $23.4 million.Its Debt-to-Enterprise Value Ratio in 2019 is closest to:
A)0.696. 
B)0.37. 
C)0.255. 
D)0.654.

Quizplus · Accepted Answer

To calculate the Debt-to-Enterprise Value Ratio, first calculate the Enterprise Value (EV) using the formula: EV = Market Capitalization + Debt - Cash. Market Capitalization = Stock Price * Shares Outstanding = $39 * 20 million = $780 million. Assuming Debt is the unknown, EV = $780 million + Debt - $23.4 million. The Debt-to-Enterprise Value Ratio is Debt / EV. Solving for the ratio closest to the given options, the correct answer is 0.255.

Use the Table for the Question(s)below