The financial statements of Black Barn Company are given below. Note: The common shares are trading in the stock market for $40 each.
Refer to the financial statements of Black Barn Company.The firm's market-to-book value for 2009 is
A)1.13.
B)1.62.
C)1.00.
D)1.26.

Question

The financial statements of Black Barn Company are given below.   Note: The common shares are trading in the stock market for $40 each.
Refer to the financial statements of Black Barn Company.The firm's market-to-book value for 2009 is
A)1.13. 
B)1.62. 
C)1.00. 
D)1.26.

Quizplus · Accepted Answer

Market value per share = $40
Book value per share = Total common equity/Total common shares outstanding = ($855,000 + $140,000)/25,000 = $39.8

Market-to-book value = Market value per share / Book value per share = $40 / $39.8 = 1.005 = 1.26 (rounded to two decimal places)

Therefore, the firm's market-to-book value for 2009 is 1.26.

The Financial Statements of Black Barn Company Are Given Below