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Homework answers / question archive / In early 2015, Ford Motor (F) had a book value of equity of $25
In early 2015, Ford Motor (F) had a book value of equity of $25.3 billion, 4.1 billion shares outstanding, and a market price of $16.41 per share. Ford also had cash of $22.1 billion, and total debt of $120.2 billion. Three years later, in early 2018, Ford had a book value of equity of $35.3 billion, 10.8 billion shares outstanding with a market price of $11.43 per share, cash of $26.9 billion, and total debt of $156.1 billion. Over this period, what was the change in Ford's a. market capitalization? b. market-to-book ratio? c. enterprise value?
a. Over the 3-year period, what was the change in The change in Ford's market capitalization was $ b. Over the 3-year period, what was the change in The change in Ford's market-to-book ratio was
Ford's market capitalization? billion. (Round to two decimal places.) Ford's market-to-book ratio? . (Round to two decimal places.)
c. Over the 3-year period, what was the change in Ford's enterprise value?
The change in Ford's enterprise value was $
billion. (Round to two decimal places.)
a) Computation of Change in Ford's Market Capitalization:
Market capitalization = Number of Share* price per Share
Market capitalization year 2015 = 4.1 billion * 16.41 = 67.28 billion
Market capitalization year 2018 = 10.8 billion *11.43 = 123.44 billion
Change in Market capitalization =123.44 - 67.28 = $56.16 billion
b) Computation of Change in Market to Book Ratio:
Market to Book Ratio = Market capitalization/ Book value
Year 2015 = 67.28 billion /25.3 billion = 2.66
Year 2018 = 123.44 billion/35.3 billion = 3.50
Change in Market to book ratio = 3.50 - 2.66 = 0.84
c) Computation of Ford's Enterprise Value:
Enterprise value = Market capitalization + Market value of debt - Cash
Year 2015 =67.28 billion +120.2 billion -22.1 billion = $165.38 billion
Year 2018 =123.44 billion +156.1 billion -26.9 billion = $252.64 billion
Change in Enterprise value = $252.64 - $165.38 = $87.26 billion
