cha 4 analysis #6

Ratios are mostly calculated using data drawn from the financial statements of a firm. However, another group of ratios, called market vaive rabios, relote to a firm's observable market valoe, stock prices, and book values, integrating information from both the market and the firm s financial statements. Consider the case of Green Caterpilor Garden Supolies Inc. Green Caterpillar Garden Supplies Inc. Just reported eamings after tax (also called net income) of 59,250,000 and a current steck price of $12.00 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 3,000,000 new shares of stock (raising its shares outstanding from 5,500,000 to 8,500,000 ). its stock price to be one vear from now? (Round any P/E ratio calculation to four decimal places.) $9.71 per share $12.00 per share $7.28 per share \$12.14 per share One vear later, Green Caterpiliars shares are trading at $55.80 per share, and the company reports the value of its total comenon equity as $16,507,000. Given this information, Green Caterpilar's market to-book (MUB) ratio is If Green Caterpdiar's forecast turns out to be correct and its price/earnings (Pye) ratio does not chenge, what does the company's management expect ies stock price to be one year from new? (Round any P/E ratio calculation to four decimal places.) $9.71 per share $12.00 per share $7.28 per share $1214 per share One year later, Green Catefpilar's shares are tracing at 555.80 per share, and the company reports the value af its total common equity as $16,507,000. Gven this information, Green Caterpillar's market-to-beok (M/8) ratio is Can a company's shares exhibit a negavve P/E ratig? No Yes Which of the following statements is true about market value ratios? Compaties with high research and development (R8D) expenses tend to have high p/E ratios. Composies with high research and development (RSD) erpenses tend to have low P/E ratios