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Luther Industries has no debt, a total equity capitalization of $20 billion, and a beta of 1.8. Included in Luther's assets are $4 billion in cash and risk-free securities. What is Luther's enterprise value?

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Answer:

2400000000

Explanation:

Luther's enterprise value will be $16 billion.

The following information can be depicted from the question given:

  • Total equity capitalization = $20 billion
  • Beta = 1.8

It should be noted that an enterprise value is the difference between the market value and cash. Therefore, the enterprise value will be:

= $20 billion - $4 billion

= $16 billion.

In conclusion, Luther's enterprise value will be $16 billion.

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