GenCorp has a total debt of $140 million and shareholders' equity of $50 million. It also has 25 million shares outstanding, with a market price of $3.50 per share. What is GenCorp's market debt-equity ratio?
A)1.60
B)0.63
C)1.02
D)0.36

Question

Quizplus · Accepted Answer

Market value of equity = 25 million shares x $3.50 per share = $87.5 million

Market value of debt = Total debt = $140 million

Market debt-equity ratio = Market value of debt / Market value of equity = $140 million / $87.5 million = 1.60

GenCorp Has a Total Debt of $140 Million and Shareholders