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In: Finance
Problem 3-9 Market Value Ratios (LG3-5) You are considering an investment in Roxie's Bed & Breakfast...
Problem 3-9 Market Value Ratios (LG3-5) You are considering an investment in Roxie's Bed & Breakfast Corp. During the last year, the firm's income statement listed an addition to retained earnings of $9.00 million and common stock dividends of $2.90 million. Roxie's year-end balance sheet shows common stockholders' equity of $42.7 million with 17 million shares of common stock outstanding. The common stock's market price per share was $9.50.
What is Roxie's Bed & Breakfast's book value per share? (Round your answer to 2 decimal places.)
What is Roxie's Bed & Breakfast's earnings per share? (Round your answer to 2 decimal places.)
Calculate the market-to-book ratio. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Calculate the price-earnings ratio. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Solutions
Expert Solution
Answer : Calculation of Book Value per share :
Book Value per share = Total Book Value of Coomon Equity / Number of shares outstanding
= 42.7 million / 17 million
= 2.51
Earning Per share = Earning available for equity share holders / Total Number of shares outstanding
= (Dividend + Addition to Retained Earning) / 17 million
=(2.90 million + 9 million) / 17 million
= 0.70
Market to Book Ratio = Market Value per share / Book value per share
= 9.5 / 2.51
= 3.78
Price Earning Ratio = Price / Earning
= 9.5 / 0.7
= 13.57 times
jeff jeffy answered 2 years agoRelated Solutions
Please do it by type not pics. 1.You are considering an investment in Roxie's Bed &...
Please do it by type not pics.
1.You are considering an investment in Roxie's Bed &
Breakfast Corp. During the last year, the firm's income statement
listed an addition to retained earnings of $10.20 million and
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sheet shows common stockholders' equity of $44.9 million with 19
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2015
2014
2015
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Current liabilities
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$
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