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A  firm with plenty of growing opportunities shows the following P/B ratios: A. 12.3 B. 1.5 C....

A  firm with plenty of growing opportunities shows the following P/B ratios:

A. 12.3

B. 1.5

C. 0.8

D. The question does not provide enough information to know

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Answer #1

A firm with plenty of growing opportunities will have a huge demand for its shares in the market,hence they will trade at a significant premium to the book value, hence the answer will be option A.

Option B and C is highky unlikely as the market participants will demand huge quantity of shares of firm as a result the P/B ratio will be high, option C can be possible in loss making companies and option B in companies which have low to normal levels of growth opportunities.

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