Question

Winston Washers' stock price is $100 per share. Winston has $10 million in total assets. Its balance sheet shows $1 million in current liabilities, $3 million in long-term debt, and $6 million in common equity. It has 650,000 shares of common stock outstanding. What is Winston's market/book ratio? Round your answer to two decimal places

Answer 1

The market price to book ratio is 10.83.

Explanation:

Winston Washers' stock price is $100 per share. It has 650,000 shares of common stock outstanding.

So, Winston,s market cap is :

`100*650000=65000000`

= 65 million

The book value is given as: Assets minus Liabilities

= 10 million - 4 million = 6 million

Now, market/book ratio = $65m/$6m = 10.83

Therefore, the market price to book ratio is 10.83.