Question

Tina's Track Supply's market-to-book ratio is currently 4.5 times and the PE ratio is 10.5 times. If Tina's Track Supply's common stock is currently selling at $100 per share, what is the book value per share and earnings per share?

Answer 1

Answer: $22.22 and $9.52

Explanation:

The market to book ratio compares market value and book value. In this question, the market to book ratio is 4.5 times which means that Tina's Track Supply's common stock is trading at 4.5 times of the book value.

            4.5 = $\frac{Market value}{Book Value}$

                   =  $\frac{100}{Book Value}$

Book value =  $\frac{100}{4.5}$

                   =$22.22

The Price Earning ratio is calculated by dividing price per share by earnings per share (EPS)

          10.5 =  $\frac{100}{EPS}$

           EPS =  $\frac{100}{10.5}$

                   =$9.52