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Answer: Equal to the market price.
**Explanation:** The correct answer is **B** because the asset-based value per share is calculated as follows: 1. **Market Value of Assets:** - Net fixed assets: €80 million * 1.25 = €100 million - Inventories: €20 million * 0.90 = €18 million - Total adjusted assets: €150 million (original) + (€100 million - €80 million) + (€18 million - €20 million) = €150 million + €20 million - €2 million = €168 million 2. **Market Value of Liabilities:** €90 million (unchanged) 3. **Asset-Based Value:** (€168 million - €90 million) / 4 million shares = €19.50 per share, which matches the market price. **Why not A or C?** - **A** is incorrect because the unadjusted asset-based value (€15.00 per share) is less than the market price, but the adjusted value matches. - **C** is incorrect because it double-counts adjustments by adding the adjusted net fixed assets and subtracting the adjusted inventories without removing the unadjusted values, leading to an inflated value (€35.50 per share).
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An analyst gathers the following book value information about a company and its common shares: Inventories €20 million Net fixed assets €80 million Total assets €150 million Total liabilities €90 million Shares outstanding 4 million The analyst estimates the market value of net fixed assets to be 125% of book value and the market value of inventories to be 90% of book value. If the stock is currently trading at €19.50 per share, the asset-based value per share is most likely:
A
Less than the market price.
B
Equal to the market price.
C
Greater than the market price.