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Homework answers / question archive / Market Value Ratios Bree's Tennis Supply's market-to-book ratio is currently 9

Market Value Ratios Bree's Tennis Supply's market-to-book ratio is currently 9

Accounting

Market Value Ratios Bree's Tennis Supply's market-to-book ratio is currently 9.4 times and PE ratio is 20 times. If Bree's Tennis Supply's common stock is currently selling at $20.50 per share, what is the book value per share and earnings per share? A. $1.025, $2.1809, respectively B. $2.1809, $1.025, respectively C. $410.00, $192.70, respectively D. $192.70, $410.00, respectively 
 

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Answer

B .

Explanation

Computation of Book Value per Share:

Market-to-Book Ratio = Market Value per Share/Book Value per Share

9.4 = $20.50/Book Value per Share

Book Value per Share = $20.50/9.4 = $2.1809

 

Computation of Earning per Share:

PE Ratio = Market Value per Share/Earnings per Share

20 = $20.50/Earnings per Share

Earnings per Share = $20.50/20

Earnings per Share = 1.025

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