The Market-to-Book Ratio method for calculating Residual Value is similar to the Price/Earnings Ratio method. It uses a “rule-of-thumb” for determining the equity value of a company and, like the P/E method, must be adjusted by adding back the value of the debt to obtain corporate value.

The Market-to-Book Residual Value (v5190) is calculated as follows:

M/B * Common Equity + Value of Dept - Debt Discount