Start-up's ratio of market value
Not what you're looking for?
Start-up Industries is a new firm that has raised $200 million by selling shares of stock. Management
plans to earn a 24 percent rate of return on equity, which is more than the 15 percent 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. How would that ratio change if the firm can earn only a 10 percent rate of return on its investments?
c. Why do investments in financial markets almost always have zero NPVs whereas firms can almost always find many investments in their new product markets with positive NPVs?
---
Purchase this Solution
Solution Summary
What will be Start-up's ratio of market value to book value?
Purchase this Solution
Free BrainMass Quizzes
Elementary Microeconomics
This quiz reviews the basic concept of supply and demand analysis.
Pricing Strategies
Discussion about various pricing techniques of profit-seeking firms.
Economics, Basic Concepts, Demand-Supply-Equilibrium
The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.
Basics of Economics
Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.
Economic Issues and Concepts
This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.