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  • Solution:: Market/book Ratio

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    GA Zin
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    Meyersdale Office Supplies has common equity of $40 million and a market/book ratio of 4.0. Given its stock price is $80 per share, the number of shares outstanding is calculated as the market value divided by the stock price, which is $160 million / $80 per share = 2 million shares outstanding. Strack Houseware Supplies has total assets of $2 billion, current liabilities of $0.2 billion, long-term debt of $0.6 billion, and common equity of $1.2 billion. With 300 million shares outstanding trading at $20 per share, its market/book ratio is calculated as the stock price divided by the book value per share of

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    Analysis 1.2

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    Meyersdale Office Supplies has common equity of $40 million and a market/book ratio of 4.0. Given its stock price is $80 per share, the number of shares outstanding is calculated as the market value divided by the stock price, which is $160 million / $80 per share = 2 million shares outstanding. Strack Houseware Supplies has total assets of $2 billion, current liabilities of $0.2 billion, long-term debt of $0.6 billion, and common equity of $1.2 billion. With 300 million shares outstanding trading at $20 per share, its market/book ratio is calculated as the stock price divided by the book value per share of

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    54 views3 pages

    Solution:: Market/book Ratio

    Uploaded by

    GA Zin
    Meyersdale Office Supplies has common equity of $40 million and a market/book ratio of 4.0. Given its stock price is $80 per share, the number of shares outstanding is calculated as the market value divided by the stock price, which is $160 million / $80 per share = 2 million shares outstanding. Strack Houseware Supplies has total assets of $2 billion, current liabilities of $0.2 billion, long-term debt of $0.6 billion, and common equity of $1.2 billion. With 300 million shares outstanding trading at $20 per share, its market/book ratio is calculated as the stock price divided by the book value per share of

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as docx, pdf, or txt
    of 3

    Market/book ratio

    i. Meyersdale Office Supplies has common equity of P40 million. The


    company’s stock price is $80 per share and its market/book ratio is 4.0.
    How many shares of stock does the company have outstanding?

    3.) ANSWER: Outstanding shares of stock = P2, 000, 000


    SOLUTION:

    Market value of the firm = Market/Book ratio x Equity


    = 4 x 40, 000, 000
    = 160, 000, 000
    = 160, 000, 000 / 80
    = 2, 000, 000
    Market/book ratio
    ii. Strack Houseware Supplies Inc. has P2 billion in total assets. The other
    side of its balance sheet consists of P0.2 billion in current liabilities,
    P0.6 billion in long-term debt, and P1.2 billion in common equity. The
    company has 300 million shares of common stock outstanding, and its stock
    price is P20 per share. What is Strack’s market/book ratio?

    4.) ANSWER: MARKET/BOOK RATIO = 5.0


    SOLUTION:

    BOOK VALUE = 1200 Million / 300 million


    = 4.00

    MARKET/BOOK RATIO = 20/4


    = 5.0
    i
    ii

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