Question

Start-Up Industries is a new firm that has raised $210 million by selling shares of stock. Management plans to earn a 20% 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? (Do not round intermediate calculations.)Market-to-book ratio 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? (Do not round intermediate calculations. Round your answer to 2 decimal places.)Market-to-book ratio

Answer 1

Answer

The answer and procedures of the exercise are attached in the image below.  

Explanation  

Please consider the data provided by the exercise. If you have any question please write me back. All the exercises are solved in a single sheet with the formulas indications.