You are given the following information: Stockholders' equity = $1,250; price/earnings ratio = 5; shares outstanding = 25; market/book ratio = 1.5. Calculate the market price of a share of the company's stock.
A) $ 33.33
B) $ 75.00
C) $ 10.00
D) $166.67
E) $133.32

Question

Quizplus · Accepted Answer

The market/book ratio is the market price per share divided by the book value per share. First, calculate the book value per share: $1,250 / 25 shares = $50. Then, use the market/book ratio: 1.5 = Market Price / $50. Solving for Market Price gives $75.00.

You Are Given the Following Information: Stockholders' Equity = $1,250;