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Leonatti Labs’ year-end price on its common stock is $25.00. The firm has total assets of...

Leonatti Labs’ year-end price on its common stock is $25.00. The firm has total assets of $49.00 million, debt ratio of 60 percent, no preferred stock, and 4 million shares of common stock outstanding. Calculate the market-to-book ratio for Leonatti Labs. (Do not round intermediate calculations and round your answer to 2 decimal places.)

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Answer #1

Debt-ratio = Total Debt / Total assets

0.60 = Total debt / $49,000,000

Total debt = $29.400,000.

Total Equity = Total Assets - Total Debt = $49,000,000 - $29,400,000

Total Equity = $19,600,000

Book value of Equity = $19,600,000 / 4,000,000 = $4.90 per share

Market to book ratio = Market price per share / Book value of equity

= $25 / $4.90

Market to book ratio = 5.10 times

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