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6. Market value ratios Ratios are mostly calculated using data drawn from the financial statements of a firm. However, another group of ratios, called market value 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 Cold Goose Metal Works Inc: Cold Goose Metal Works Inc, just reported earnings after tax (also called net income) of $9,000,000 and a current stock price of $34.00 per share. The company is forecasting an increase of 25% for its after-tax income next year, but it also expects it will have to issue 2,500,000 new shares of stock (raising its shares outstanding from 5,500,000 to 8,000,000). 1 Cold Goose's forecast turns out to be correct and its price/earnings (P/E) ratio does not change, what does the company's management expect its stock price to be one year from now? (Round any P/E ratio calculation to four decimal places.) $29.23 per share O $34.00 per share @ $21.92 per share $36.54 per share One year later, Cold Goose's shares are trading at $48.36 per share, and the company reports the value of its total common equity as $46,768,000 Given this information, Cold Goose's market-to-book (M/B) ratio is If Cold Goose's forecast turns out to be correct and its price/earings (P/E) ratio does not change, what does the company's management expect its stock price to be one year from now? (Round any P/E ratio calculation to four decimal places.) $29.23 per share $34.00 per share $21.92 per share $36.54 per share One year later, Cold Goose's shares are trading at $48.36 per share, and the company reports the value of its total common equity as $46,768,000, Given this information, Cold Goose's market-to-book (M/B) ratio is Can a company's shares exhibit a negative P/E ratio? Yes No Which of the following statements is true about market value ratios? Low P/E ratios could mean that the company has a great deal of uncertainty in its future earnings. High P/E ratios could mean that the company has a great deal of uncertainty in its future earnings