Start-Up Industries is a new firm that has raised $280 million by selling shares of stock. Management plans to earn a 20% rate of return on equity, which is more than the 12% rate of return available on comparable-risk investments. Half of all earnings will be reinvested in the firm.

 a. What will be Start-Up's ratio of market value to book value? Do not round intermediate calculations. 

b. What will be Start Up's ratio of market value to book value if the firm can earn only a rate of return of 8% on its investments? Do not round intermediate calculations. Round your answer to 1 decimal place.

Answer rating: 100% (QA)

a Market Value to Book Value Ratio with 20 Return on Equity StartUps initial equity is 280 millionan... View the full answer