Question

In 2015, Caterpillar Inc. had about 757 million shares outstanding. Their book value was $41.0 per share, and the

market price was $93.50 per share. The company’s balance sheet shows that the company had $34.50 billion of long-term debt, which was currently selling near par value.

a. What was Caterpillar’s book debt-to-value ratio? (Do not round intermediate calculations. Enter your answer as a decimal rounded to 2 decimal places.)

b. What was its market debt-to-value ratio? (Do not round intermediate calculations. Enter your answer as a decimal rounded to 2 decimal places.)

c. Which measure should you use to calculate the company’s cost of capital?

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