TwitterMe, Inc., is a new company and currently has negative earnings. The compa

Question

TwitterMe, Inc., is a new company and currently has negative earnings. The company’s sales are $2,650,000 and there are 250,000 shares outstanding.

If the benchmark price-sales ratio for the company is 4.9, how much will you pay for the stock? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

If the benchmark price-sales ratio for the company is 4.3, how much will you pay for the stock? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

TwitterMe, Inc., is a new company and currently has negative earnings. The company’s sales are $2,650,000 and there are 250,000 shares outstanding.

Explanation / Answer

sales per share = sales / shares outstanding

sales per share = 2650000 / 250000 =10.6

1 pay for the stock = benchmark price-sales ratio * sales per share

pay for the stock = 4.9 * 10.6 = 51.94

2 pay for the stock = 4.3 * 10.6 = 45.58

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