Question

Tina's Track Supply's market-to-book ratio is currently 4.5 times and PE ratio is 10.5 times. If Tina's Track Supply's common stock is currently selling at $100 per share, what is the book value per share and earnings per share? Multiple Choice $450, $1,050, respectively $1,050, $450, respectively $22.2222, $9.5238, respectively $9.5238, $22.2222, respectively

Answer 1

Answer:

$22.2222, $9.5238, respectively

Explanation:

The market-to-book ratio is given by a share's market value divided by its book value, if shares are selling for $100 on the market, the book value is:

$B = \frac{\ 100}{4.5}=\ 22.2222$

The price to earnings ratio (PE ratio) is determined as a share's price divided by the earnings per share. Earnings per share are:

$E=\frac{\ 100}{10.5}\\E=\ 9.5238$

The book value per share and earnings per share are $22.2222, $9.5238, respectively