[selmamarla3]

You are given the following information: Stockholders' equity: $3.75 billion; price/earnings ratio= 3.5, common shares outstanding- 50 milion; and market/book ratio= 1/9. What is the price of a share of a company's common stock?

[morgaine300]

This is going to take a little math work. In fact, I hate when they give these problems, cause they think it shows an understanding of the accounting or finance issue, when it's really just a test of your math & algebra skills.

Set up your two equations: P/E ratio and the market/book ratio. i.e. write out what the equation is supposed to be. The PE ratio is made up of earnings per share, so you need that one too. Another good thing to figure out (looking ahead at what you'll need), is the equity per share. (Equity divided by total shares.)

Then fill in what information you have available to you. You'll have some blank spots and they'll look like algebra problems. (i.e. you'll have an answer, like you know P/E is 3.5, but will have other missing things.) Look for the ones that have 2 of 3 numbers filled in and solve for the missing number. That number likely will be in another equation and you can then fill in that missing number. Etc.

This is the way to always work something like this. Write down all your equations. If anything in the equation requires an equation, write it down too. Fill in what you have. Then start solving for what you don't know.

Again, give it a try. Come back with what you manage to put together and we can lead you from there.

[bunnyKutty]

Book value of shares = 3,750,000,000
Common shares = 50,000,000
Book value per share = 3,750,000/ 50,000,000
= $75

Market/ book ratio = Market value per share/ bookvalue per share = 1.9
Market value per share = 1.9 x 75 = $142.50

[morgaine300]

The thread is a year and a half old. You've been doing quite a bit of pulling up of old threads, even after I made a point of it here:
https://www.askmehelpdesk.com/financ...ock-56755.html

It gets a bit annoying wasting time reading something just to discover it's something old.