Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Ratios are mostly calculated based on the financial statements of a firm. However, another group of ratios, called market-based ratios, relates to a firm's observable
Ratios are mostly calculated based on the financial statements of a firm. However, another group of ratios, called market-based ratios, relates to a firm's observable market value, stock prices, and book values, integrating information from both the market and the firm's financial statements. Consider the case of Niagular Corp.: Niagular Corp. just reported a net income of $9,250,000, and its current share price is $34.00 per share. Niagular Corp. is forecasting an increase of 25% for its net 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 ). If Niagular Corp.'s forecast turns out to be correct and its price/earnings ( P/E ) ratio does not change, what does Niagular Corp. expect its share price to be one year from now? $27.52 $34.00 $20.64 $34.40 One year later, Niagular Corp.'s share is trading at $65.52, and the company reports its common equity value as $46,784,000. What is Niagular Corp.'s market/book (M/B) ratio? Can a company's share have a negative P/E ratio? Which of the following statements is true about market value ratios? High P/E ratios could mean that the company is riskier than other firms. Low P/E ratios could mean that the company is riskier than other firms
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started