13) Baxter & Baxter has total assets of $710,000. There are 45,000 shares of stock outstanding with a market value of $28 a share. The firm has a net profit margin of 7.1 percent and a total asset turnover of 1.29. What is the price-earnings ratio?

19.38

Explanation:

Baxter & Baxter

Market value share / Percentage of profit margin * (Total assets * Total asset turnover) / Outstanding shares

Where:

Market value shares=28

Percentage of profit margin = 71%

Total assets = 710,000

Total asset turnover=1.29

Outstanding shares = 45,000

Hence:

Price-earnings ratio =

$28/[0.071 * ($710,000 * 1.29) ]/45,000

=19.38