A firm has 41 million shares outstanding with a current share price of $4.30 The firm has a market-to-book ratio of 8.5 and a book debt-equity ratio of 2.2.If the firm currently has $18 million in cash,what is its enterprise value?
A)$176 million
B)$204 million
C)$148 million
D)$49 million
E)$240 million

Question

Quizplus · Accepted Answer

Enterprise Value (EV) = Market Value of Equity + Debt - Cash
Market Value of Equity = 41 million shares * $4.30/share = $176.3 million
Book Value of Equity = Market Value of Equity / Market-to-Book Ratio = $176.3 million / 8.5 = $20.74 million
Book Value of Debt = Book Value of Equity * Debt-to-Equity Ratio = $20.74 million * 2.2 = $45.63 million
EV = $176.3 million + $45.63 million - $18 million = $204.93 million ≈ $204 million.

A Firm Has 41 Million Shares Outstanding with a Current