Blossom Company is considering an investment that will return a lump sum of $850,000 3 years from now. Click here to view the fa
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Market to book ratio is the ration of market price per share divided by the book value per share, it can be mathematically expressed as below:
Market to Book Value=
In this problem the first step is to find Market Value per share
PE Ratio is given by the following formula:
PE Ratio=
12.8=
Market Price Per Share=$25.216
We now find Book Value Per Share, Book Value is nothing but the Equity Value of the Organization, In the given problem, we don't have this information, but we have total assets, which amounts to $416900($329700+$87200). Using Debt Ratio we can find book value per share as below:
Lets assume Shareholders Equity is x, Thus total liability will be Total Assets-x
Debt Equity Ratio is given as below:
Debt Equity Ratio=
0.42=
x=$293592
Book Value per share=$293592/36000
Book Value per Share=8.155
Market to book value=25.216/8.15533
Market to book value ratio= 3.09