Question

Bree's Tennis Supply's market-to-book ratio is currently 9.4 times and PE ratio is 20 times. If Bree's Tennis Supply's common stock is currently selling at $20.50 per share, what is the book value per share and earnings per share?

Answer 1

Answer:

The book value per share and earnings per share is $2.1809 and $1.025 respectively.

Explanation:

For computing the book value per share, we have to used the market to book ratio formula which is shown below:

Market to book ratio = Market price per share ÷ book value per share

9.4 times = $20.50 ÷ book value per share

So, book value per share = $20.50 ÷ 9.4 times

                                          = $2.1809

Now, the earning per share is calculated by using a PE ratio which is displayed below:

PE ratio = Share price ÷ Earning per share

20 times = $20.50 ÷ Earning per share

So, earning per share = $20.50 ÷ 20 times

                                     = $1.025

Hence, the book value per share and earnings per share is $2.1809 and $1.025 respectively.