Personal Finance 1st Edition by Jack R. Kapoor

Exercise 33

Calculating Ratios. According to the financial statements for Samson Electronics, Inc., the firm has total assets valued at $310 million. It also has total liabilities of $190 million. Company records indicate that the firm has issued 2 million shares of stock.

a. Based on the above information, calculate the book value for a share of Samson Electronics.

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b. If a share of Samson Electronics, Inc., currently has a market value of $50 a share, what is the market-to-book ratio?

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c. Based on the market-to-book ratio, is a share of Samson Electronics overpriced or underpriced? Explain your answer.

Step 1 of 3

a.

Calculation of book value of shares of SE:

Book value of shares is computed by dividing the total equity by the number of outstanding common shares.

Substitute $310 million for total Assets, $190 million for total liabilities and 2 million for issued shares.

Hence, Book Value per share of SE is $60 per share