$($Analyzing market value$)$ The balance sheet for Leo's Discount Tire Company shows a book value of stockholders' equity $($book value per share $$ total shares outstanding$)$ of

$$23,757,000.$ Furthermore, the firm's income statement for the year just ended has a net income of $$518,000,$ which is $$0\mathrm{.}235$ per share of common stock outstanding. The price$-$earnings

ratio for firms similar to Leo's Discount Tire Company is $18\mathrm{.}42.$

a$.$ What price would you expect Leo's Discount Tire Company shares to sell for?

b$.$ What is the book value per share for Leo's shares?

c$.$ What does the market price and book value per share indicate about the firm?

a$.$ What price would you expect Leo's Discount Tire Company shares to sell for?

The market price per share is $$4\mathrm{.}33.($Round to the nearest cent.$)$

b$.$ What is the book value per share for Leo's shares?

The book value per share is $$10\mathrm{.}78.($Round to the nearest cent.$)$

c$.$ What does the market price and book value per share indicate about the firm?

In this case, the

market price per share than the book value per share indicates that investors are willing to pay

over time through

employment of the firm's assets. $($Select from the

claim on the assets shown on the balance sheet because investors expect Leo's earnings to

drop$-$down menus.$)$