Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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**Z Space, Incorporated Financial Analysis Exercise**
**Overview:**
Z Space, Incorporated, is a new company and currently has negative earnings. The company's sales are $2.7 million and there are 175,000 shares outstanding.
**Questions:**
a. **If the benchmark price-sales ratio is 4.3, what is your estimate of an appropriate stock price?**
*(Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)*
b. **What if the price-sales ratio were 3.6?**
*(Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)*
**Answer Boxes:**
- **a. Stock price if price-sales is 4.3:** [ ]
- **b. Stock price if price-sales is 3.6:** [ ]
---
**Instructions for Calculation:**
1. **Calculate Stock Price:**
- The stock price can be estimated using the formula:
\[
\text{Stock Price} = \left( \frac{\text{Sales}}{\text{Shares Outstanding}} \right) \times \text{Price-Sales Ratio}
\]
2. **For Question a (Price-Sales Ratio = 4.3):**
- Use the sales of $2.7 million and 175,000 shares outstanding.
- Calculate the per-share sales by dividing the total sales by the number of shares.
- Multiply the per-share sales by the price-sales ratio of 4.3.
3. **For Question b (Price-Sales Ratio = 3.6):**
- Repeat the above calculation with the different price-sales ratio of 3.6.
By following these steps, you will be able to estimate the appropriate stock price for Z Space, Incorporated, under different benchmark price-sales ratios.
---
This exercise provides practical experience in financial ratio analysis and helps in understanding how stock prices can be estimated based on sales and shares outstanding.](https://content.bartleby.com/qna-images/question/ae8a11bd-ad7f-47d8-a5c8-89ea0daeecfe/3b1bcdd1-f6a5-4245-b2d8-5edde038eca6/561lkiv_processed.jpeg)
Transcribed Image Text:---
**Z Space, Incorporated Financial Analysis Exercise**
**Overview:**
Z Space, Incorporated, is a new company and currently has negative earnings. The company's sales are $2.7 million and there are 175,000 shares outstanding.
**Questions:**
a. **If the benchmark price-sales ratio is 4.3, what is your estimate of an appropriate stock price?**
*(Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)*
b. **What if the price-sales ratio were 3.6?**
*(Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)*
**Answer Boxes:**
- **a. Stock price if price-sales is 4.3:** [ ]
- **b. Stock price if price-sales is 3.6:** [ ]
---
**Instructions for Calculation:**
1. **Calculate Stock Price:**
- The stock price can be estimated using the formula:
\[
\text{Stock Price} = \left( \frac{\text{Sales}}{\text{Shares Outstanding}} \right) \times \text{Price-Sales Ratio}
\]
2. **For Question a (Price-Sales Ratio = 4.3):**
- Use the sales of $2.7 million and 175,000 shares outstanding.
- Calculate the per-share sales by dividing the total sales by the number of shares.
- Multiply the per-share sales by the price-sales ratio of 4.3.
3. **For Question b (Price-Sales Ratio = 3.6):**
- Repeat the above calculation with the different price-sales ratio of 3.6.
By following these steps, you will be able to estimate the appropriate stock price for Z Space, Incorporated, under different benchmark price-sales ratios.
---
This exercise provides practical experience in financial ratio analysis and helps in understanding how stock prices can be estimated based on sales and shares outstanding.
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