You are considering an investment in Roxie\'s Bed & Breakfast Corp. During the l

Question

You are considering an investment in Roxie's Bed & Breakfast Corp. During the last year, the firm's income statement listed an addition to retained earnings of $13.80 million and common stock dividends of $1-70 million. Roxie's year-end balance sheet shows common stockholders' equity of $51.5 million with 15 million shares of common stock outstanding The common stock's market price per share was $8.50. What is Roxie's Bed & Breakfast's book value per share? (Round you answer to 2 decimal places.) What is Roxie's Bed & Breakfast's earnings per share? (Round your answer to 2 decimal places.) Calculate the market-to-book ratio (Do not round intermediate calculations. Round your answer to 2 decimal places.) Calculate the price earnings ratio. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Explanation / Answer

1. Book value per share = Total common stockholders equity / nomber of equity shares

= 51.5 millions / 15 million shares = 3.43

2.Earnings per share = net income / weighted average common shares outstanding

= 13800000 / 15000000 = 0.92

3.Market to book ratio = Market vaue of share / book value of share

= 8.50 / 3.43 = 2.48

4. price earnings ratio = MPS / EPS

= 8.50 / 0.92 = 9.24.

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