(Market value analysis) The balance sheet for Larry Underwood Motors shows a book value of stockholders’ equity (book value per share × total shares outstanding) of $1,300,000. Furthermore, the firm’s income statement for the year just ended has a net income of $500,000, which is $0.25 per share of common stock outstanding. The price-earnings ratio for firms similar to Underwood Motors is 20.
What price would you expect Underwood Motors shares to sell for?
What is the book value per share for Underwood’s shares?