$12.$ Market value ratios

Ratios are mostly calculated based on the financial statements of a firm. However, another group of ratios, called market$-$based ratios, relate to a firm$$s observable market value, stock prices, and book values, integrating information from both the market and the firm$$s financial statements.

Consider the case of Taggart Goods Corp.:

Taggart Goods Corp. just reported a net income of $$5,000,000,$ and its current stock price is $$17\mathrm{.}50$ per share. Taggart is forecasting an increase of $25\%$ for its net income next year, but it also expects it will have to issue $2,600,000$ new shares of stock $($raising its shares outstanding from $5,500,000$ shares to $8,100,000$ shares$).$

If Taggart$$s forecast turns out to be correct and its price$-$to$-$earnings $($P$/$E$)$ ratio does not change, what does management expect its stock price to be one year from now? $($Hint: If you choose to compute the firm$$s price$/$earnings ratio, round its value to four decimal places.$)$

$$14\mathrm{.}81$ per share

$$17\mathrm{.}50$ per share

$$11\mathrm{.}11$ per share

$$18\mathrm{.}51$ per share

One year later, Taggart Goods Corp.$$s stock is trading at $$45\mathrm{.}00,$ and the company reports its common equity value as $$23,992,200.$ What is Taggart Goods Corp.$$s market$-$to$-$book$($M$/$B$)$ ratio?