$6.$ Market value ratios

Ratios are mostly calculated using data drawn from the financial statements of a firm. However, another group of ratios, called market$-$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 Cute Camel Woodcraft Company:

Cute Camel Woodcraft Company just reported earnings after tax $($also called net income$)$ of $$8,500,000,$ and a current stock price of $$28\mathrm{.}50$ 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 $2,000,000$ new shares of stock $($raising its shares outstanding from $5,500,000$ to $7,500,000).$

If Cute Camel$$s forecast turns out to be correct and its price$-$to$-$earnings $($P$/$E$)$ ratio does not change, what does the company$$s management expect its stock price to be one year from now? $($Note: Round intermediate calculations to four decimal places. Round the expected stock price to two decimal places.$)$

$$26\mathrm{.}12$ per share

$$28$ per share

$$19\mathrm{.}59$ per share

$$32\mathrm{.}65$ per share

One year later, Cute Camel$$s shares are trading at $$52\mathrm{.}08$ per share, and the company reports the value of its total common equity as $$39,180,000.$ Given this information, Cute Camel$$s market$-$to$-$book $($M$/$B$)$ ratio is $.($Note: Do not round intermediate calculations.$)$