In 2013 Caterpillar Inc. had about 658 million shares outstanding. Their book value was $37 per share, and the market price was $88.50 per share. The company's balance sheet shows that the company had $15.7 billion of long-term debt, which was currently selling near par value.
a. What was Caterpillar's book debt-to-value ratio?
b. What was its market debt-to-value ratio?
c. Which measure should you use to calculate the company's cost of capital?