:Q1Firm A reports a Profit Margin of 5% and aTotal Asset Turnover Ratio of 1.5. Their totalasset level is $6,000,000. Assume there are600,000 shares outstanding and the P/E ratiois 13 times. Also, assume the Return on Equityis 14%. Based on this, calculate the price of.share/Book value per share ratio

Profit Margin = Net Income/Sales Revenue Total Asset Turnover = Sales Revenue/ Average Total…

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is 14%. Based on this, calculate the price of .share/Book value per share ratio

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

:Q1
Firm A reports a Profit Margin of 5% and a
Total Asset Turnover Ratio of 1.5. Their total
asset level is $6,000,000. Assume there are
600,000 shares outstanding and the P/E ratio
is 13 times. Also, assume the Return on Equity
is 14%. Based on this, calculate the price of
.share/Book value per share ratio

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Step 1 Formula for Profit Margin, Asset Turnover, P/E Ratio, ROE

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Step 2 Calculation of Price per share

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Step 3 Calculation of Book Value per Share

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