A firm has 12 million shares outstanding with a current share price of $8.50.The firm has a market-to-book ratio of 3.55 and a book debt-equity ratio of 0.8.If the firm currently has $4 million in cash,what is its enterprise value?
A)$121 million
B)$83 million
C)$180 million
D)$102 million
E)$125 million

Question

Quizplus · Accepted Answer

Enterprise Value = Market Value of Equity + Debt - Cash
Market Value of Equity = Number of Shares Outstanding * Current Share Price = 12 million * $8.50 = $102 million
Book Value of Equity = Market Value of Equity / Market-to-Book Ratio = $102 million / 3.55 = $28.73 million
Book Value of Debt = Book Value of Equity * Debt-to-Equity Ratio = $28.73 million * 0.8 = $22.98 million
Enterprise Value = $102 million + $22.98 million - $4 million = $121 million

A Firm Has 12 Million Shares Outstanding with a Current