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

Balance Sheet (Millions)		Income Statement (Millions)
Assets
Cash	1,290	Net Sales	51,600
Receivables	9,890	Operating Costs	48,246
Inventory	13,760	Depreciation	903
Property, Plant and Equipment	18,060	EBIT	2,451
Total Assets	43,000	Interest	927
		EBT	1,524
Liabilities and Owners Equity		Taxes	320
Accounts Payable	8,170	Net Income	1,204
Notes Payable	6,677
Wages Payable	4,073	Other Data
Long Term Bonds	8,815	Shares Outstanding (millions)	1000
Total Liabilities	27,735	Dividends (millions)	$200.00
Total Equity	15,265	Current Interest Rate	5.00%
Total Liabilities and Owners Equity	43,000	Tax rate	21%
		Stock Price	$50

Solutions

Expert Solution

Price = 50

EPS = Net income/No of shares

= 1204/1000

= 1.204

P/E = Price/EPS

= 50/1.204

= 41.53

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 1 year ago

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