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 $2,550,000 and there are 220,000 shares outstanding.

If the benchmark price-sales ratio for the company is 5.1, 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 4.5, 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 5.1, how much will you pay for the stock? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Explanation / Answer

Answer:

Requirement 1:

Sales per share=Sales/Outstanding shares

=$2550,000/220000

=11.59 per share

Current stock price=price-sales ratio *Sales per share

=5.1*11.59=$59.11

Answer:Requirement 2:

Current stock price=price-sales ratio *Sales per share

=4.5*11.59=$52.16

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