Start-Up Industries is a new firm that has raised $200 million by selling shares of stock. Management plans to earn a 24% rate of return on equity, which is more than the 15% rate of return available on comparable-risk investments. Half of all earnings will be reinvested in the firm.a. What will be Start-Up’s ratio of market value to book value?b. What will be Start-Up’s ratio of market value to book value if the firm can earn only a rate of return of 10% on its investments?

Relax

Respuesta :

Answer:

a) 4

b) 0.5

Explanation:

Check the attached files for the complete solutions to the questions

Note: for par a)

Market to book value = Market value/Book value = 800/200

Market value to Book value ratio = 4

That's in case you are wondering how I got 4 in the attached file for part a

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