Use the table for the question(s)below.

-Refer to the balance sheet above.If in 2006 Luther has 10.2 million shares outstanding and these shares are trading at $16 per share,then using the market value of equity,the debt-equity ratio for Luther in 2006 is closest to:
A)1.71
B)1.78
C)2.31
D)2.35

Question

Use the table for the question(s)below.
  
-Refer to the balance sheet above.If in 2006 Luther has 10.2 million shares outstanding and these shares are trading at $16 per share,then using the market value of equity,the debt-equity ratio for Luther in 2006 is closest to:
A)1.71 
B)1.78 
C)2.31 
D)2.35

Quizplus · Accepted Answer

Market value of equity = 10.2 million shares × $16 per share = $163.2 million
Market value of debt = $214.2 million
Debt-Equity Ratio = Market value of debt/Market value of equity
= $214.2 million/$163.2 million
= 1.31
The closest option is B, 1.78.

Use the Table for the Question(s)below