Beryl Personnel Ltd. has a similar organizational structure, client base and growth as does Excel Temporary Services Inc. Both were established within six months of each other approximately five years ago. Book value for Beryl Personnel's 500,000 common shares is $750,000. The company's market capitalization is $2.25 million. Book value for Excel Temporary Services Inc.'s 100,000 shares is $600,000. Using the data provided and an appropriate ratio, what would Excel's market capitalization be?

Question

Quizplus · Accepted Answer

The market capitalization ratio is calculated by dividing the market capitalization by the book value. For Beryl Personnel, the market capitalization ratio is $2.25 million / $750,000 = 3. For Excel Temporary Services, the market capitalization ratio is $x / $600,000 = 3. Solving for x, we get $x = $1.8 million.