Question

Equinox Bioengineering began operations in January of 2015. In its first year of operation,

sales were $85 million and the net loss was $(5.1 million). Free cash flow was $(300,000).
Equinox has 10 million shares outstanding. If you think the price to sales ratio for this
company should be 1 or less, what is the most you should pay per share.

Answer 1

Based on a price to sales ratio of 1, the maximum price to pay per share for Equinox Bioengineering is $8.50, calculated by dividing the total sales of $85 million by the 10 million shares outstanding.

Step-by-step explanation:

If you believe the price to sales ratio for Equinox Bioengineering should be 1 or less, you will base the maximum price you should pay per share on the company's sales. Given that sales were $85 million, and there are 10 million shares outstanding, the calculation is straightforward:

Total Sales ÷ Number of Shares = Price Per Share

$85,000,000 ÷ 10,000,000 = $8.50

Therefore, the most you should pay per share, following the price to sales ratio of 1, is $8.50 per share.