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Question

In 2013 Caterpillar Inc. had about 656 million shares outstanding. Their book value was $35 per share, and the

market price was $87.50 per share. The company’s balance sheet shows that the company had $17.7 billion of long-term debt, which was currently selling near par value.

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

  Book value   

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

  Market value   

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

 
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