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Hello tutor
In this qs I don’t understand the figures for market value of equity as 0.76 and debt as 0.24 …I have tried to reach these ..I think for debt the qs says Anchorage has gearing ratio based on market capitalisation of 24 % ..could you please interpret how we get mkt value of debt from ratio based on market capitalisation
I read that market capitalisation is simply multiplying no of shares by market price of share
Please guide me on getting those figures for mkt value of equity and debt with regard to gearing ratio based on mkt capitalisation
Thanks for ur time and support
Market capitalisation is indeed the number of shares multiplied by the price per share.
However, since the gearing ratio is 24%, it means that the total value of the debt is 24% of the total of debt plus equity. Therefore the total value of the equity must be 100 – 24 = 76% of the total of debt plus equity.
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