What is the firm's market to book value for 2009?
The formula and answer is as follows:
$100/[($850,000/25,000)] = 2.9400
Please explain where the $100 comes from and why dividing the
common stock by total current liabilities. Please provide a
thorough explaination of the entire problem.
Homework Answers
Market ot book value = Market share price / Book value per share
Share is trading at $100 each as mentioned in the question. Therefore market value of per share is $100.
Book value = Total assets - total liabilities
Book value = 2,600,000 - 1,750,000
Book value = $850,000
Book value per share = Book value / total shares outsanding
Book value per share = 850,000 / 25,000
market to book ratio = market value per share / ( book value per share)
market to book ratio = 100 / ( 850,000 / 25,000)
market to book ratio = 2.94
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