Given the following information,calculate the market price per share of WAM Inc.
Earnings after interest and taxes= $200,000
Earnings per share= $2.00
Stockholders' equity= $2,000,000
Market/Book ratio= 0.20
A) $20.00
B) $8.00
C) $4.00
D) $2.00
E) $1.00

Question

Quizplus · Accepted Answer

The Market/Book ratio is given as 0.20. To find the market price per share, you can use the formula: Market Price per Share = (Market/Book Ratio) * (Stockholders' Equity / Number of Shares). Given the earnings per share is $2.00, we can infer there are 100,000 shares ($200,000 / $2.00). Therefore, the book value per share is $20 ($2,000,000 / 100,000 shares). Multiplying the book value per share by the Market/Book ratio gives us the market price per share: $20 * 0.20 = $4.00.

Given the Following Information,calculate the Market Price Per Share of WAM