(Most recent 12 months) Dell 2007 Apple 2007

Net Income ($ millions) $3,572 $3,130

Shares outstanding (millions) 2,300 869.16

Earnings per share ($) $1.55 $3.60

Price per share (8/1/07) $27.76 $133.64

Price-to-earnings ratio (PE ratio) 17.91 37.11

Book value of common equity ($ millions) $4,129 $9,984

Book value per share ($) $1.80 $11.49

Market-to-book ratio 15.42 11.63

On August1, 2007 the Dell ComputerCorporation's stock closed trading at $ 27.76

$27.76 per share while AppleCorporation's shares closed at $ 133.64

$133.64. Does this mean that becauseApple's stock price is roughly four times that ofDell's, Apple is the more valuablecompany? Interpret the prices for these two firms using the information foundhere:

.

It appears that Apple enjoys a

price per share when compared to its 2007 earnings but a

higher

lower

price when compared to the book value of thefirm's equity. The

lower

higher

market-to-book ratio for Apple reflects that fact that Apple has used a great deal

less

more

equity(and

more

less

debt) to finance its operations.