What is the current price of a share of stock for a firm with $5 million in balance-sheet equity, 500,000 shares of stock outstanding, and a price/book value ratio of 8?

Question

asked May 1, 2020 45.5k views

1 Answer

Kito · Answer 1 · 2020-05-05T05:25:44+0000

Answer: $80

Explanation: The above value can be computed using following equations:-

$8=(market\:value)/(book\:value)$

where,

$book\:value\:per\:share=(Total\:market\:value)/(No.\:of\:shares)$

$book\:value\:per\:share=(5\:million)/(500,000)$

= $10

Now, putting the values into initial equation we get :-

$8=(market\:value)/(\$10)$

so,

price or market value = $80