Question

Consider the following balance sheet:

Luther Corporation Consolidated Balance Sheet December 31, 2016 and 2015 (in $ millions)

Assets	2016	2015		Liabilities and Stockholders' Equity	2016	2015
Current Assets				Current Liabilities
Cash	63.6	58.5		Accounts payable	87.6	73.5
Accounts receivable	55.5	39.6		Notes payable/ short-term debt	10.5	9.6
Inventories	45.9	42.9		Current maturities of long-term debt	39.9	36.9
Other current assets	6.0	3.0		Other current liabilities	6.0	12.0
Total current assets	171.0	144.0		Total current liabilities	144.0	132.0
Long-Term Assets				Long-Term Liabilities
Land	66.6	62.1		Long-term debt	239.7	168.9
Buildings	109.5	91.5		Capital lease obligations	---	---
Equipment	119.1	99.6		Total Debt	239.7	168.9
Less accumulated depreciation	(56.1)	(52.5)		Deferred taxes	22.8	22.2
Net property, plant, and equipment	239.1	200.7		Other long-term liabilities	---	---
Goodwill	60.0	--		Total long-term liabilities	262.5	191.1
Other long-term assets	63.0	42.0		Total liabilities	406.5	323.1
Total long-term assets	362.1	242.7		Stockholders' Equity	126.6	63.6
Total Assets	533.1	386.7		Total liabilities and Stockholders' Equity	533.1	386.7

If in 2016 Luther has 10.2 million shares outstanding and these shares are trading at $16 per share, then using the market value of equity, the debt to equity ratio for Luther in 2016 is closest to:

		1.47
		1.78
		2.31
		4.07

Answer 1

debt/equity = long term debt/(shares*price) = 239.7/(10.2*16)=1.47