Q44. An analyst gathered the following information from a company's most recent financial statements(U.S.$ in millions):

The analyst also determined that the company uses the LIFO inventory method, but most companies in the industry use the FIFO method. The footnotes to the financial statements indicate that if the company had used the FIFO method, the inventory balance would have been $45 million higher than the amount reported on the company's most recent financial statements. If the company's (common stock is currently selling for $59 per share, the most appropriate price to book value ratio to use in valuing he company is:

A.1.59

B.1.68

C.1.79

D.1.89

[此贴子已经被作者于2007-10-29 20:06:40编辑过]

答案和详解如下：

Q44.  D  Study session 14-64-a,b

The book value of common equity is $32,5-40 in preferred stock+ an inventory adjustment of 27 for adjusted common equity of $312 million. The inventory adjustment must be tax affected because although cost of goods sold would be reduced by $45 mullion only (1-T) or 60% would be added to retained earnings.

The price to book rate is $59/$31.20 = 1.89

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