Assuming a cost of equity capital of 18.5%,a growth rate of 9.5% and a rate of return on the (net)assets in place of 12%,what is the book-to-market ratio of this firm?

A) $ -0.607 $
B) $ 0.750 $
C) $ -60.67 $
D $ -7732 $

Question

Assuming a cost of equity capital of 18.5%,a growth rate of 9.5% and a rate of return on the (net)assets in place of 12%,what is the book-to-market ratio of this firm?

A) $ -0.607 $
B) $ 0.750 $
C) $ -60.67 $
D $ -7732 $

Quizplus · Accepted Answer

The book-to-market ratio is: BV/MV = (book value of equity)/(market value of equity);hence,BV/MV = (0.185 - 0.095)/0.12 = 0.750

Assuming a Cost of Equity Capital of 18 −0.607 -0.607 −0.607

Assuming a Cost of Equity Capital of 18 $-0.607$