1. Look up Merck on the Market Insight database.

a. Recalculate book- and market-value balance sheets using the most recent available financial information. Use the same format as for Table 18.3 .

b. Track Merck’s long-term debt and debt ratio over the last five years. How have they changed? Does it appear that Merck has a stable target debt ratio? Do you see any evidence of pecking-order financing?

c. How much has Merck spent to repurchase its own shares? Would the trade-off theory predict share repurchases for a conservatively financed company like Merck?