3/29/2021
Assignment Print View
Score:
18.81/20
Points
94.05
%
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3/29/2021
1.
Assignment Print View
Award: 1.88 out of 2.50 points
Here is a simplified balance sheet for Locust Farming:
Current assets
Long-term assets
Total
Locust Farming
Balance Sheet
($ in millions)
$ 42,527
Current liabilities
46,838
Long-term debt
Other liabilities
Equity
Total
$ 89,365
$ 29,752
27,755
14,323
17,535
$ 89,365
Locust has 660 million shares outstanding with a market price of $86 a share.
a. Calculate the company’s market value added. (Enter your answers in millions.)
b. Calculate the market-to-book ratio. (Round your answer to 2 decimal places.)
c. How much value as the company created for its shareholders as a percent of shareholders’ equity,
that is, the net capital contributed to the firm by its shareholders? (Enter your answer as a
percentage rounded to the nearest whole number.)
Here is a simplified balance sheet for Locust Farming:
Locust Farming
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3/29/2021
Assignment Print View
Current assets
Long-term assets
Total
Balance Sheet
($ in millions)
$ 42,527
Current liabilities
46,838
Long-term debt
Other liabilities
Equity
Total
$ 89,365
$ 29,752
27,755
14,323
17,535
$ 89,365
Locust has 660 million shares outstanding with a market price of $86 a share.
a. Calculate the company’s market value added. (Enter your answers in millions.)
b. Calculate the market-to-book ratio. (Round your answer to 2 decimal places.)
c. How much value as the company created for its shareholders as a percent of shareholders’ equity,
that is, the net capital contributed to the firm by its shareholders? (Enter your answer as a
percentage rounded to the nearest whole number.)
Explanation:
a.
Market value = 660 million × $86 = $56,760 million
Market value added = $56,760 – $17,535 = $39,225 million
b.
Market value / Book value = $56,760 / $17,535 = 3.24
c.
Value added as a multiple of the equity investment is $39,225/$17,535 = 2.24, or equivalently, 224%
of the book value of equity.
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