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.
(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?