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Basic Question 1 of 8
As an investor, how would you determine the total market value of a publicly traded corporation such as General Motors?
II. The value of debt as it appears on the most recent financial statements plus the current market value of GM's common stock.
III. The current market value of GM's stock plus the market value of GM's debt.
I. The values of debt and equity as they appear on the most recent financial statements.
II. The value of debt as it appears on the most recent financial statements plus the current market value of GM's common stock.
III. The current market value of GM's stock plus the market value of GM's debt.
User Contributed Comments 10
User | Comment |
---|---|
vincenthuang | in reality the mkt value of debt is almost equal to the book value of debt |
Will1868 | As mentioned in the notes book value is often used as a proxy for the market value |
JP09 | Yes, the market value of debt can be a major pain in to calculate especially if a firm has many different debt issues. And ultimately there is rarely a significant difference in the book value and market value of debt. Every Capital Budgeting course I have taken has assumed that Book Value of debt is sufficient. In theory though you would want the market value of both. |
mattl31 | GM's market value and book value differ significantly in today's market |
sarath | use the current market value always whenever possible,... |
wordpower | GM is bankrupt these days... |
poomie83 | I thought gm recently had the biggest stock issue in history |
sungryongl | why not I? |
ana2 | sungryongl, it is not I because it is not the current Mkt Value for both Debt and Equity. |
Inaganti6 | Disappointed John Tan had nothing to say |
Your review questions and global ranking system were so helpful.
Lina
Learning Outcome Statements
calculate and interpret the cost of equity capital using the capital asset pricing model approach and the bond yield plus risk premium approach;
CFA® 2024 Level I Curriculum, Volume 4, Module 33.