Question

Assuming that Novartis AG (NVS) has a book value of $5.55, based upon the average price - to - book ratio for its competitors, Novartis' stock price is closest to: $13.00 $39.70 $21.50 $44.35

Answer 1

Answer:

The correct option : D)

$ 44.35

Explanation:

Price Earning ( P/E) Ratio is computed as : Market Price of the Stock / Earnings per Share (EPS) or

Market price of the stock = P/E Ratio x EPS

Market price of Novartis share = 13.24 x $ 3.35 = $ 44.35

Price to Book ( P / B) :

Go to the balance sheet of the company. Find out the book value of stockholders' equity. Divide the value by the number of common shares outstanding. That would give you the book value of each common share. Divide the market price of the stock by its book value. This is the P/B ratio.