Consider the table given below to answer the first question (shares and market v
ID: 2814704 • Letter: C
Question
Consider the table given below to answer the first question (shares and market values in millions).
346.5
26,305
a. The price of Entergy stock has risen to $95. What is the market value of the firm’s equity if the number of outstanding shares does not change? (Enter your answer in billions rounded to 3 decimal places.)
b. The rating agency has revised Catalytic Concept’s bond rating to BBB (use Table 2.2). What interest rate, approximately, would the company now need to pay on its bonds? (Enter your answer as a percent rounded to 2 decimal places.)
Number of Shares × Stock Price = Market Capitalization Callaway Golf (ELY) 93.8 × $ 8.76 = $ 821 Alaska Air Group (ALK) 124.7 × $ 80.77 = $ 10,074 Entergy (ETR)346.5
× $ 75.92 = $26,305
Yum! Brands (YUM) 408.7 × $ 77.77 = $ 31,875 General Electric (GE) 9,331.0 × $ 30.34 = $ 283,091Explanation / Answer
(a) Market value of firm's equity = Market price of 1 share x Number of outstanding shares
= 95 x 346.5
= $32,917.5
(b) Interest rate is to be calculated according to table 2.2 but you have not provided it, hence interest rate cannot be determined. If you provide it, I will definitely calculate.