Vinnie's Motors Has a Market-To-Book Ratio of 3

question 112

Multiple Choice

Vinnie's Motors has a market-to-book ratio of 3. The book value per share is $4.00. Holding market-to-book constant,a $1 increase in the book value per share will:

• A) cause the accountants to increase the equity of the firm by an additional $2.
• B) increase the market price per share by $1.
• C) increase the market price per share by $12.
• D) tend to cause the market price per share to rise.
• E) only affect book values but not market values.

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