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) Investors believe the company's assets are not likely to be profitable since its market value is worth less than its book value.
C) The firm's market value is more than its book value.
D) The value of the firm's assets is greater than their liquidation value.

Question

Quizplus · Accepted Answer

The market value of the company is $80 million (20 million shares at $4 each), which is less than its book value of $128 million. This suggests that investors might believe the company's assets are not likely to be as profitable in the future, hence the lower market valuation compared to its book value.

A Public Company Has a Book Value of $128 Million