The value of shareholder’s equity for ABC Corp amounts to US$100million. ABC is trading at...

The value of shareholder’s equity for ABC Corp amounts to US$100 million. ABC is trading at $200 per share, while the ABC has 2 million shares outstanding. Estimate the price to book ratio of ABC:

	a.	40x
	b.	4x
	c.	0.4x
	d.	2x

Expert Solution

The price to book ratio is computed as shown below:

= Price per share / Book value per share

Book value per share is computed as follows:

= Value of shareholder's equity / Number of shares

= $ 100 million / 2 million shares

= $ 50

So, the ratio will be as follows:

= $ 200 / $ 50

= 4x

jeff jeffy answered 2 years ago

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