The ratio of a stock s market price to its book
The ratio of a stock’s market price to its book value per share reveals how much investors are willing to pay for each $1 of a company’s net assets per share. The following information is available for companies A, B, and C.
Required:
(a) For each of the companies listed, compute the book value per share and the market price to book value ratio. (Note: None of the companies have preferred stock outstanding.)
(b) How is it possible for a company’s market price to book value ratio to differ significantly from 1.0?
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