A public company has a book value of $128 million. They have 20 million shares outstanding, with a market price of $4 per share. Which of the following statements is true regarding this company?
A)Investors may consider this firm to be a growth company.
B)The value of the firm's assets is greater than their liquidation value.
C)The firm's market value is more than its book value.
D)Investors believe the company's assets are not likely to be profitable as its market value is worth less than its book value.

Question

Quizplus · Accepted Answer

The company's market value ($80 million, calculated as 20 million shares at $4 each) is less than its book value ($128 million), indicating investors might believe the company's assets are not likely to be as profitable, hence option D is correct.

A Public Company Has a Book Value of $128 Million