Question

In early 2015, Ford Motor (F) had a book value of equity of $24.8 billion, 3.8 billion shares outstanding, and a market price of $16.01 per share. Ford also had cash of $21.5 billion, and total debt of $118.7 billion. Three years later, in early 2018, Ford had a book value of equity of $34.1 billion, 3.8 billion shares outstanding with a market price of $10.43 per share, cash of $26.3 billion, and total debt of $157.6 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 GE's market capitalization? The change in GE's market capitalization was 5 billion. (Round to two decimal places.) b. Over the 3-year period, what was the change in GE's market-to-book ratio? The change in GE's market-to-book ratio was . (Round to two decimal places.) c. Over the 3-year period, what was the change in GE's enterprise value? The change in GE's enterprise value was billion. (Round to two decimal places.)

Answer 1

a. Change in Market capitalisation =(New Share price-Old Share Price)*Number of shares
=(10.43-16.01)*3800000000= -21204000000 or -21.20

b. Market to book value in 2015 =(16.01*3.8)/24.8 =2.45
Market to book value in 2018 =(10.43*3.8)/34.1 =1.16
Change in book value =1.16-2.45 =1.29

c. Enterprise Value of Ford Motor in 2015=Market Value+Debt-Cash =16.01*3.8+118.7-21.5 =158.04
Enterprise Value of Ford Motor in 2018=Market Value+Debt-Cash =10.43*3.8+157.6-26.3 =170.93
Change =158.04 -170.93 =-12.90

(Answers may be calculated without using negative sign if required)