Question

Blitz corporation had total sales of $3,250,000 last year and has 112,000 shares of stock outstanding. the benchmark ps is 1.72 times. what stock price would you consider appropriate?

Answer 1

The appropriate stock price for Blitz Corporation can be estimated using the benchmark Price-to-Sales ratio of 1.72 times. By dividing the total sales of $3,250,000 by the number of shares outstanding, 112,000, and multiplying by the P/S ratio, the appropriate stock price comes out to be around $49.82 per share.

Step-by-step explanation:

To determine the appropriate stock price for Blitz Corporation, given the total sales and the number of shares outstanding, we must calculate the Price-to-Sales ratio (P/S ratio). The P/S ratio is given by the benchmark of 1.72 times. We can use this as a simple valuation tool to estimate the company's stock price.

To calculate the P/S ratio, we take the company's market capitalization (stock price multiplied by the number of shares outstanding) and divide it by the total sales. Inverse that process, we can find the appropriate stock price by taking the total sales and dividing that by the number of shares outstanding, and then multiplying by the P/S ratio.

Total Sales: $3,250,000
Shares Outstanding: 112,000
Benchmark P/S Ratio: 1.72
Appropriate Stock Price = (Total Sales / Shares Outstanding) * P/S Ratio

Using the calculation, we would have an appropriate stock price as follows:

Appropriate Stock Price = ($3,250,000 / 112,000) * 1.72 = $49.82 approximately per share.