?? 6. Analyze and calculate. (38\') I) Here is a simplified balanced sheet for C

Question

?? 6. Analyze and calculate. (38') I) Here is a simplified balanced sheet for Caterpillar Tractor: Current assets $42,524 Current Liability$29,755 $27,752 $14,317 $17,532 $89,356 :Long-term Long-term debt $46,832 : assets Other liabilities Equity :Total $89,356Total Caterpillar has 657 million shares outstanding with a market price of $83 a share. a. Calculate the company' s market value added? (3') b. Calculate the market-to-book ratio? (3') c. Has the company created value for shareholders? (2')

Explanation / Answer

a) Market Value = 657 million x $83 = $54,531 million

Market Value Added = $54,531 - $17,532 = $36,999

b)

Market to book ratio = Market value / Book Value = $54,531 / $17,532 = 3.11

c)

Yes the company has increased the value of the equity investment by 311%

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