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You are given the following information: Stockholders' equity as reported on the firm’s balance sheet =...

You are given the following information: Stockholders' equity as reported on the firm’s balance sheet = $5.5 billion, price/earnings ratio = 11.5, common shares outstanding = 52 million, and market/book ratio = 1.4. Calculate the price of a share of the company's common stock. Round your answer to the nearest cent.

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Expert Solution

Information provided:

Shareholder’s equity= $5.5 billion

Price to earnings ratio= 11.5

Total number of shares outstanding= $52 million

Market to book ratio= 1.4

The question is solved by first calculating the market value of shares.

Market value of shares= Market to book ratio*Book value of shareholder’s equity

                                            = 1.4*$5,500,000,000

                                            = $7,700,000,000.

Stock price per share= Market value of shares/ Total number of shares outstanding

                                         = $7,700,000,000/ 52,000,000

                                         = $148.08.

Therefore, the price of the company’s common stock is $148.08.

jeff jeffy answered 2 years ago
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