(v5120.00) Market-to-Book Ratio

Your estimate of the market-to-book ratio prevalent for this business in each forecast period.

Market-to-Book Ratio (v5120.00) is determined as follows:

Estimated Market Value of Business / Common Equity  (v2890.00)
Common Equity  (v2890.00)

The Residual Value (v5030) is calculated by multiplying the Estimated Market Value of Business by Common Equity (v2890), (which represents the book value of the company's equity), adding the book value of debt in the last period.

Adding debt to the estimated market value of the equity to arrive at the total value of the company is recommended, because the value is being discounted by the cost of capital (costs of debt and equity) rather than solely the cost of equity.

This total must be discounted by the Discount Factor (v5000.01) to express it in present value terms. It is used in the Market-to-Book Ratio Residual Value (v5190).