Cooper Inc's latest EPS was $4.oo, its book value per share was $20.00, it had 200,000 shares outstanding, and its debt ratio was 40%. How much debt was outstanding?
a. $2,333,333
b. $2,666,667
c. $3,000,000
d. $3,333,333
e. $3,666,667
B) $2,666,667.
To calculate the outstanding debt, we need to know the total equity of Cooper Inc.
Since we have the book value per share and the number of outstanding shares, we can calculate the total equity as follows:
Total Equity = Book Value per Share * Number of Outstanding Shares
Total Equity = $20.00 * 200,000
Total Equity = $4,000,000
Now, let's calculate the total assets. We know that the debt ratio is 40%, which means that the debt is equal to 40% of the total assets.
Total Debt = Debt Ratio * Total Assets
Total Debt = 0.40 * Total Assets
Since total assets equal total equity plus total debt:
Total Assets = Total Equity + Total Debt
Total Assets = $4,000,000 + 0.40 * Total Assets
Simplifying the equation:
0.60 * Total Assets = $4,000,000
Total Assets = $4,000,000 / 0.60
Total Assets = $6,666,667
Now, we can calculate the debt:
Total Debt = 0.40 * Total Assets
Total Debt = 0.40 * $6,666,667
Total Debt = $2,666,667
Therefore, the outstanding debt for Cooper Inc. is $2,666,667, which corresponds to option b.
To calculate the outstanding debt of Cooper Inc, we need to first determine the total value of the company.
The book value per share is given as $20.00, and the number of outstanding shares is 200,000. Therefore, the total book value of the company is calculated as:
Book value per share * Number of outstanding shares
= $20.00 * 200,000
= $4,000,000
The debt ratio is given as 40%. This means that the company's debt represents 40% of its total value. We can calculate the total value of the company using the formula:
Total value of the company = Book value of the company / (1 - Debt ratio)
= $4,000,000 / (1 - 0.40)
= $4,000,000 / 0.60
= $6,666,667
Now, we can calculate the amount of debt outstanding by subtracting the book value from the total value of the company:
Debt outstanding = Total value of the company - Book value of the company
= $6,666,667 - $4,000,000
= $2,666,667
Therefore, the amount of debt outstanding for Cooper Inc is $2,666,667.
The correct answer is b. $2,666,667.