Answer:
The target price using the price to sales ratio is 20.
Explanation:
Current price to sales ratio is [tex]c_{p/s}=[/tex] 5.
The target price to sales ratio is [tex]f_{p/s}=[/tex]6.
Future sales per share is [tex]f_s=[/tex]20.
[tex]f_{ p/s}=\frac{price}{sale}\\f_{ p/s}=c_{ p/s}+\frac{price}{sale}\\6=5+\frac{price}{20}\\\frac{price}{20}=6-5\\\frac{price}{20}=1\times 20\\price=20\\[/tex]
The target price using the price to sales ratio is 20.
