Answer:
10.23x
Explanation:
Market/Book Ratio = Stock Price / Net Book Value per Share
Stock Price = $25 per share
Net Book Value per Share = Net Book Value / shares of common stock outstanding
Shares of common stock outstanding = 900 million shares
where;
Total Assets = $11 billion
Total Liabilities = Current Liabilities + Long-Term Liabilities
Total Liabilities = $1.1 billion + $7.7 billion
Total Liabilities = $8.8 billion
Hence;
Net Book Value = Total Assets - Total Liabilities
Net Book Value = $11 billion - $8.8 billion
Net Book Value = $2.2 billion
Therefore;
Net Book Value per Share = Net Book Value / shares of common stock outstanding
Net Book Value per Share = $2.2 billion / 900 million shares
Net Book Value per Share = $2,200,000,000 / 900,000,000 shares
Net Book Value per Share = $2.44 per share
So;
Market/Book Ratio = Stock Price / Net Book Value per Share
Market/Book Ratio = $25 per share / $2.44 per share
Market/Book Ratio = 10.23x
It means that Stock is over valued and it has performed well because Market/Book Ratio is greater than 1. So the Stock price is set at higher price in relation to Edelman Engines' Net Book Value, so its Market/Book Ratio is 10.23x.
