Adobe is a software company that creates the most innovative creativity apps. Recently their software has become cloud-based. Their price to book ratio is 1.67 and they currently have 1,000,000 shares outstanding. Below you will find an excerpt from their balance sheet for 2019 Calculate the stock price

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Adobe is a software company that creates the most innovative creativity apps. Recently their software has become cloud-based. Their price to book ratio is 1.67 and they currently have 1,000,000 shares outstanding. Below you will find an excerpt from their balance sheet for 2019

  1. Calculate the stock price using the price to book ratio. 

 

  1. If their stock price is listed on the stock market at $9, should the stockholders sell or hold the stock? 

 

  1. Critically discuss the price to book ratio in valuing stocks and provide an alternative method to see if a stock is undervalued or overvalued.
Adobe Corporation
Balance Sheet exerpt
Year ended Dec 31st, 2019 (in thousands)
Assets
Cash
15,000
Accounts receivable
7,500
Inventory
7,500
Total current assets
30,000
Liabilities
Accounts Payable
Current long term debt
Total current liabilities
7,500
7,500
15000
Long term debt
Total liabilities
7,500
22,500
Owners equity
7500
Transcribed Image Text:Adobe Corporation Balance Sheet exerpt Year ended Dec 31st, 2019 (in thousands) Assets Cash 15,000 Accounts receivable 7,500 Inventory 7,500 Total current assets 30,000 Liabilities Accounts Payable Current long term debt Total current liabilities 7,500 7,500 15000 Long term debt Total liabilities 7,500 22,500 Owners equity 7500
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