Edelman Engines has 2 billion in total assets Its balance sh

Edelman Engines has $2 billion in total assets. Its balance sheet shows $0.4 billion in current liabilities, $1.2 billion in long-term debt, and $0.4 billion in common equity. It has 300 million shares of common stock outstanding, and its stock price is $28 per share. What is Edelman\'s market/book ratio? Round your answer to two decimal places.

Solution

Book Value of Common Equity = $400 million
Number of shares outstanding = 300 million
Stock Price = $28 per share

Market Value of Common Equity = Number of shares outstanding * Stock Price
Market Value of Common Equity = 300 million * $28
Market Value of Common Equity = $8,400 million

Market/Book Ratio = Market Value of Common Equity / Book Value of Common Equity
Market/Book Ratio = $8,400 million / $400 million
Market/Book Ratio = 21.00