Problem 7.14 – Negative Earnings, Stock Price and Price-Sales Ratio Estimation

Essentials of Corporate Finance

Ross, Westerfield, and Jordan

10th Edition and 11th Edition

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Given a new company with negative earnings, sales, and number of shares outstanding, and a benchmark price-sales ratio, estimate an appropriate stock price. What happens if the benchmark price-sales ratio changes? Determine the stock price for the firm using the price-sales ratio of a benchmark.

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