To calculate the Market-Value-to-Book-Value (MV/BV) ratio, we need both the market value of the company and its book value.

Step 1: Market Value Calculation

The market value of a company is calculated as the stock price multiplied by the number of shares outstanding.

$\text{Market Value} = \text{Stock Price} \times \text{Number of Shares}$

Given that the stock price at the end of 2003 is $15 and the company has 100 shares outstanding, the market value is:

$\text{Market Value} = 15 \times 100 = 1500$

Step 2: Book Value Calculation

The book value is calculated as the difference between total assets and total liabilities.

Total Assets (2003):

The company's total assets consist of both current and fixed assets. The current and fixed asset values for 2003 are:

• Cash: $500
• Marketable Securities: $300
• Accounts Receivable: $800
• Inventory: $2000
• Net Fixed Assets: $2000

So, total assets in 2003:

$\text{Total Assets} = 500 + 300 + 800 + 2000 + 2000 = 5600$

Total Liabilities (2003):

The company's total liabilities consist of notes payable, accounts payable, and long-term debt. These values for 2003 are:

• Notes Payable: $1600
• Accounts Payable: $2000
• Long-term Debt: $6000

So, total liabilities in 2003:

$\text{Total Liabilities} = 1600 + 2000 + 6000 = 9600$

Book Value:

The book value is total assets minus total liabilities:

$\text{Book Value} = \text{Total Assets} - \text{Total Liabilities} = 5600 - 9600 = -4000$

Step 3: Market-to-Book Ratio Calculation

Finally, the Market-Value-to-Book-Value ratio is:

$\text{MV/BV Ratio} = \frac{\text{Market Value}}{\text{Book Value}}$

However, since the book value is negative, this calculation becomes undefined in the usual sense. The company’s liabilities exceed its assets, indicating that the company has a negative equity, meaning that its book value is negative.

So, in this case, the MV/BV ratio is undefined due to the negative book value.

Would you like a more detailed explanation, or help with another calculation?

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Here are 5 related questions:

1. What is the significance of a negative book value for a company?
2. How does depreciation affect the book value of fixed assets?
3. What is the relationship between stock price and market value?
4. How do you calculate net income from the data provided?
5. How does the tax rate influence a company’s net income?

Tip: A negative book value suggests that the company has more liabilities than assets, which could be a sign of financial distress.