Goods financial information shows the following: Stockholders equity as reported

Question

Goods financial information shows the following: Stockholders equity as reported on the company’s balance sheet =$65 billion, price/earnings ratio=9, common shares outstanding =180 million, and market/bond ratio = 2. What is the price of a share of Goods common stock based on the above info? Goods financial information shows the following: Stockholders equity as reported on the company’s balance sheet =$65 billion, price/earnings ratio=9, common shares outstanding =180 million, and market/bond ratio = 2. What is the price of a share of Goods common stock based on the above info?

Explanation / Answer

Market to book ratio = share price/net book value per share

Now the ratio is given as 2.

Thus 2 = share price/net book value per share

or 2*net book value per share = share price

Now net book value = total assets - total liabilities = equity

Thus net book value = $65 billion

So net book value per share = $65 billion/180 million shares

= $361.11

As stated earlier 2*net book value per share = share price

or 2*361.11 = share price

or share price = $722.22

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