Question

In: Finance

Use the data above to calculate the P/E ratio and the M/B ratio.

Balance Sheet (Millions)  Income Statement (Millions) 
Assets    
Cash1,290 Net Sales51,600
Receivables9,890 Operating Costs48,246
Inventory13,760 Depreciation903
Property, Plant and Equipment18,060 EBIT2,451
Total Assets43,000 Interest927
   EBT1,524
Liabilities and Owners Equity  Taxes320
Accounts Payable8,170 Net Income1,204
Notes Payable6,677   
Wages Payable4,073 Other Data 
Long Term Bonds8,815 Shares Outstanding (millions)1000
Total Liabilities27,735 Dividends (millions)$200.00
Total Equity15,265 Current Interest Rate5.00%
Total Liabilities and Owners Equity43,000 Tax rate21%
   Stock Price$50
     

Use the data above to calculate the P/E ratio and the M/B ratio.

Solutions

Expert Solution

1.

Price = 50

EPS = Net income/No of shares

         = 1204/1000

         = 1.204

 

P/E = Price/EPS

       = 50/1.204

       = 41.53

 

2.

Book value of equity = 15265

Market value of equity = No of shares x price

                                     = 1000 x 50

                                     = 50000

 

M/B = market value of equity /book value of equity

        = 50000/15265

        = 3.28

1. P/E = 41.53

2. M/B = 3.28

Junaid answered 2 years ago
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