Chang, Inc.'s balance sheet shows a stockholders equity book value (total common equity) of $750,500. The firm's earnings per share were $3.00 resulting in a price/earnings ratio of 12.25x. There are 50,000 shares of common stock outstanding. What is the price/book ratio

2.45

Explanation:

Given that,

Stockholders equity book value = $750,500

Earnings per share = $3.00

Price-earnings ratio = 12.25

Common stock outstanding = 50,000 shares

Market price per share:

= Earnings per share * Price-earnings ratio

= $3.00 * 12.25

= $36.75

Equity book value per share:

= Stockholders equity : Common stock outstanding

= $750,500 : 50,000

= $15.01

Price-book ratio:

= Market price per share : Equity book value per share

= $36.75 : $15.01

= 2.45