BV: Debt

BV: Equity

BV: D/(D+E)

MV: Debt

MV: Equity
















For Disney, the market value debt ratio of 21.02% is much lower than the book value debt ratio of 35.10%. For Aracruz, the market debt ratio is 30.82%, lower than the book debt ratio of 43.12%.

Bookscape's only debt takes the form of operating lease commitments. The bookstore has a 25 years remaining on a real estate leases, requiring the payment of $500,000 a year. The present value of these operating lease commitments, using a 5.50% pre-tax cost of borrowing, is:

Present value of operating lease commitments = 500 (PV of annuity, 5.5%, 25 years)

Bookscape does not have a market value of equity, since it is a private firm. The book value of equity for the firm at the end of 2003 was $ 5 million.

Recession Remedy

Recession Remedy

Free Yourself From Debt Forever. Discover How A Laid Off Worker In Dire Straits Freed Himself From His Unimaginable Debt, Conquered Recession And Carved His Way To Financial Freedom. Finally You Can Fully Equip Yourself With These “Must Have” Tools For Conquering Recession And Live A Life Without Having To Worry About Debt Collectors.

Get My Free Ebook

Post a comment