A firm has current assets that could be sold for their book value of $7 million. The book value of its fixed assets is $57 million, but they could be sold for $99 million today. The firm has total debt with a book value of $32 million but interest rate declines have caused the market value of the debt to increase to $47 million.

What is this firm's market-to-book ratio?

3.3125

1.84 The market-to-book ratio is a valuation ratio that compares the market value of a firm's assets to their book value. It is calculated by dividing the market value of the firm's assets by their book value.

To determine this firm's market-to-book ratio, we need to calculate the market value of its assets and book value of its assets separately.

1. Market value of current assets: The question states that the current assets could be sold for their book value of $7 million, implying that the market value is also $7 million.

2. Market value of fixed assets: The book value of the fixed assets is given as $57 million, but they could be sold for $99 million today. Therefore, the market value of the fixed assets is $99 million.

3. Total market value of the firm's assets: To calculate the total market value of the firm's assets, we sum the market values of the current and fixed assets. In this case, it would be $7 million (current assets) + $99 million (fixed assets) = $106 million.

4. Total book value of the firm's assets: To calculate the total book value of the firm's assets, we sum the book values of the current and fixed assets. In this case, it would be $7 million (current assets) + $57 million (fixed assets) = $64 million.

Now we can calculate the market-to-book ratio by dividing the total market value of the firm's assets ($106 million) by the total book value of the firm's assets ($64 million):

Market-to-Book Ratio = Market Value of Assets / Book Value of Assets
Market-to-Book Ratio = $106 million / $64 million
Market-to-Book Ratio ≈ 1.66

Therefore, the firm's market-to-book ratio is approximately 1.66.