In early 2018, Abercrombie & Fitch (ANF) had a book equity of $ 1 comma 256$1,256...
In early 2018, Abercrombie & Fitch (ANF) had a book equity of
$ 1 comma 256$1,256
million, a price per share of
$ 22.49$22.49,
and
67.767.7
million shares outstanding. At the same time, The Gap (GPS) had a book equity of
$ 3 comma 149$3,149
million, a share price of
$ 32.08$32.08,
and
393393
million shares outstanding.
a. What is the market-to-book ratio of each of these clothing retailers?
b. What conclusions do you draw from comparing the two ratios?
a. What is the market-to-book ratio of each of these clothing retailers?
Homework Answers
PT a ANF
Book value =$1256 million
Market capitalisation = Price * number of shares
=22.49*67.7 million i.e.$1522.573 million
Market to book ratio = Market value/Book value
=1522.573 million/1256 million i.e. 1.21223
GPS
Book value =$3149 million
Market capitalisation = Price * number of shares
=32.08*393 million i.e.$12607.44 million
Market to book ratio = Market value/Book value
=12607.44 million/3149 million i.e.4.00363
PT b Market to book ratio is higher in case of GPS.i.e. GPS may be overvalued or the future prospect of GPS is better then the other one so investor is giving higher value.
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