Answer this question and its parts

Ratios are mostly calculated using data drawn from the financial statements of a firm. However, another group of ratios, called market value ratios, relate to a firms observable market value, stock prices, and book values, integrating information from both the market and the firms financial statements.

Consider the case of Green Caterpillar Garden Supplies Inc.:

Green Caterpillar Garden Supplies Inc. just reported earnings after tax (also called net income) of $9,750,000 and a current stock price of $23.00 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 2,900,000 new shares of stock (raising its shares outstanding from 5,500,000 to 8,400,000).

1-If Green Caterpillars forecast turns out to be correct and its price/earnings (P/E) ratio does not change, what does the companys management expect its stock price to be one year from now? (Round any P/E ratio calculation to four decimal places.)

A)$18.84 per share

B)$23.00 per share

C)$14.13 per share

D)$23.55 per share

2-One year later, Green Caterpillars shares are trading at $49.60 per share, and the company reports the value of its total common equity as $31,651,200. Given this information, Green Caterpillars market-to-book (M/B) ratio is __________.

Is it possible for a company to exhibit a negative EPS and thus a negative P/E ratio?

No

Yes

3-Which of the following statements is true about market value ratios?

A)Companies with high research and development (R&D) expenses tend to have low P/E ratios.

B)Companies with high research and development (R&D) expenses tend to have high P/E ratios.