Question

On August​ 1, 2007 the Dell Computer​ Corporation's stock closed trading at $ 27.76 per share while Apple​ Corporation's shares closed at $ 133.64. Does this mean that because​ Apple's stock price is roughly four times that of​ Dell's, Apple is the more valuable​ company? Interpret the prices for these two firms using the information found​ here:

(Most recent 12 months) Dell 2007 Apple 2007
Net Income ($ millions) $3,572 $3,130
Shares outstanding (millions) 2300 869.16
Earnings per share ($) $1.55 $3.60
Price per share (8/1/07) $27.76 $133.64
Price-to-earnings ratio (PE ratio) 17.91 37.11
Book value of common equity ($ millions) $4,129 $9,984
Book value per share ($) $1.80 $11.49
Market-to-book ratio 15.42 11.63
It appears that Apple enjoys a (lower or higher) price per share when compared to its 2007 earnings but a (lower or higher) price when compared to the book value of the firm's equity. The (higher or lower) market-to-book ratio for Apple reflects that fact that Apple has used a great deal (less or more) equity and (more or less) debt to finance its operations.

Answer 1

Answer: The answer is provided below

Step-by-step explanation:

It appears that Apple enjoys a (higher) price per share when compared to its 2007 earnings but a (lower) price when compared to the book value of the firm's equity. The (lower) market-to-book ratio for Apple reflects the fact that Apple has used a great deal (more) equity and (less) debt to finance its operations.

Apple will enjoy a higher price per share because Apple​ Corporation's shares closed at $ 133.64 while Dell Computer​ Corporation's stock closed trading at $ 27.76 per share. Also, the lower market-to-book ratio for Apple of $11.63 compared to Dell's market to book ratio of $15.42 shows that Apple used more of equity and less debt for its business.