Assume the following information about a publicly traded pharmaceutical firm:
Revenue: $16,000,000 -
Cash flow: $1,700,000 -
Net worth per share: $14.55 -
Number of common shares outstanding: 1,000,000
Required return: 21% per year -
Expected growth rate: 19% per year
Next dividend: $1.05 per share -
Using this information, what are the price-to-sales, price-to-book, and price-to-cash flow ratios, respectively?
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A. B. C. D. E. F.A
To calculate the price-to-sales, price-to-book, and price-to-cash flow ratios, it is necessary to know the price of the common stock in question at t0, which is not provided in this example.
To calculate the price-to-sales (P/S) ratio, you divide the market price per share by the revenue per share. Given that the revenue is $16,000,000 and the number of common shares outstanding is 1,000,000, the revenue per share is $16,000,000 / 1,000,000 = $16. The P/S ratio is then calculated as the market price per share divided by the revenue per share.
To calculate the price-to-book (P/B) ratio, you divide the market price per share by the net worth per share. The net worth per share is given as $14.55. The P/B ratio is then calculated as the market price per share divided by the net worth per share.
To calculate the price-to-cash flow (P/CF) ratio, you divide the market price per share by the cash flow per share. The cash flow is given as $1,700,000, and the number of common shares outstanding is 1,000,000. Therefore, the cash flow per share is $1,700,000 / 1,000,000 = $1.70. The P/CF ratio is then calculated as the market price per share divided by the cash flow per share.
However, the market price per share is not given in the information provided. Without this information, it is not possible to calculate the ratios accurately. Therefore, the answer is A. The answer cannot be completely calculated from the information provided.
None of the provided answer options (B, C, D, E, F) is correct because they all present calculated values for the ratios, which cannot be determined without the market price per share.