Question

In: Finance

The founder of Alchemy Products Inc. discovered a way to turn gold into lead and patented...

The founder of Alchemy Products Inc. discovered a way to turn gold into lead and patented this new technology. He then formed a corporation and invested $1,500,000 in setting up a production plant. He believes that he could sell his patent for $72 million.

a. What is the book value of the firm? (Enter your answer in dollars not in millions.)

b. What is the market value of the firm? (Enter your answer in dollars not in millions.)

c. If there are two million shares of stock in the new corporation, what would be the book value per share? (Round your answer to 2 decimal places.)

d. If there are two million shares of stock in the new corporation, what would be the price per share? (Round your answer to 2 decimal places.)

Expert Solution

Solution :

a. The Book value of the Firm is equal to the Investment made in setting up a production plant.

As per the information given in the question we have

Investment made in setting up a production plant = $ 1,500,000

Thus the Book value of the firm = $ 1,500,000

b. The market value of the Firm is equal to the total of Investment made in setting up a production plant and the estimated selling price of the Patent in the market

= Investment made in setting up a production plant + Estimated selling price of the Patent in the market

As per the information given in the question we have

Investment made in setting up a production plant = $ 1,500,000

Estimated selling price of the Patent in the market = $ 72,000,000

Thus the market value of the firm = $ 1,500,000 + $ 72,000,000 = $ 73,500,000

c. The formula for calculating the Book value per share = Book value of the firm / No. of shares of stock of the corporation

As per the information available we have

Book value of the firm = $ 1,500,000 ; No. of shares of stock of the corporation = 2,000,000

Thus the Book value per share = $ 1,500,000 / 2,000,000 = $ 0.75

d. The formula for calculating the Price per share = Market value of the firm / No. of shares of stock of the corporation

As per the information available we have

Market value of the firm = $ 73,500,000 ; No. of shares of stock of the corporation = 2,000,000

Thus the Price per share = $ 73,500,000 / 2,000,000 = $ 36.75

jeff jeffy answered 5 months ago

The Z-Tech Corporation (probably owned by Elon Musk) has found a way to turn lead into...

The Z-Tech Corporation (probably owned by Elon Musk) has found a way to turn lead into gold. The company’s pre-hedge profit can be approximated by: 2S(t) – 2,017, where S(t) is the price of gold at time t. The current spot price of gold is 1,045 per oz. The continuously compounded risk-free rate is 6%. Two possible hedging strategies are available to the company to reduce their risk to the price of gold six months from today. Strategy 1 –...

Hi, my name is Peter Metcalf. I'm the CEO and lead founder of Black Diamond. Very...

Hi, my name is Peter Metcalf. I'm the CEO and lead founder of Black Diamond. Very early on in the beginning of the company, the sports of climbing, mountaineering [inaudible] skiing were relatively small at that time. They've grown dramatically. However, if you aggregated the global demand for that product, then you could have a fairly meaningful business. I recognize that to be competitive, to do what we really wanted to do, we had to think globally. It was going...

d. Why and when was the Gold Standard abandoned? Discuss the incidents that lead to the...

d. Why and when was the Gold Standard abandoned? Discuss the incidents that lead to the abolishment of the Gold Standard. e. What is the difference between the Bretton Woods and Gold Standard monetary systems? What is the role of gold in the Bretton Woods system? f. Discuss the role of capital controls and fixed exchange rates in the Bretton Woods system. Discuss the monetary trilemma. g. Why and when was the Bretton Woods system abandoned?

Whitenall Corporation produces and sells teeth whitening products. The company has created and patented a formula...

Whitenall Corporation produces and sells teeth whitening products. The company has created and patented a formula for a new whitener. The CEO wants to make sure the product is priced competitively. The company anticipates that it will sell 400,000 units of the product in the first year with the following estimated costs: Product design and licensing $1,700,000 Direct materials 4,000,000 Direct manufacturing labor 1,600,000 Variable manufacturing overhead 400,000 Fixed manufacturing overhead 2,500,000 Fixed marketing 3,000,000 Required: 1. The company believes...

Pfizer-BioNTech is the founder and single producer of Covid-19 vaccines sold in the world. There was a worldwide argument on the patented drugs of the pharmaceutical industry especially in the wake of the current pandemic.

Pfizer-BioNTech is the founder and single producer of Covid-19 vaccines sold in the world. There was a worldwide argument on the patented drugs of the pharmaceutical industry especially in the wake of the current pandemic.a) Draw a graph to illustrates the effect of patented Covid-19 vaccines produced by Pfizer-BioNTech. In your graph, show the:i. profit area of the market.ii. consumer surplus.iii. producer surplus.iv. deadweight loss.b) Why Pfizer-BioNTech will be allocatively inefficient?c) Briefly discuss the differences between monopoly and monopolistic firm's...

Population bottlenecks and founder effects A.have opposite effects on population variation B.both lead to genetic drift,...

Population bottlenecks and founder effects A.have opposite effects on population variation B.both lead to genetic drift, which reduces variation in the population C.both result in genetic variation due to extreme conditions D.both result in an increased mutation rate in the population

Pop Design Inc. changes the way it markets its products. It also makes changes in the...

Pop Design Inc. changes the way it markets its products. It also makes changes in the designs of its store layouts citing generational differences as the reason. Pop Design is responding to: Multiple Choice A. Internal changes B. High labor costs C. Demographic characteristics D. Technological advancements E. Organizational culture

The Way I Work: Blake Mycoskie of Toms Shoes Blake Mycoskie, founder of Toms Shoes, built...

The Way I Work: Blake Mycoskie of Toms Shoes Blake Mycoskie, founder of Toms Shoes, built a lifestyle business based on social entrepreneurship. Blake Mycoskie doesn't like to sit still. A serial entrepreneur, Mycoskie got the idea for his latest company, Toms Shoes, while on vacation in Argentina. After spending time in several villages in which children didn't own shoes, he created a company -- originally dubbed Shoes for Tomorrow -- in which helping those kids, and others like them,...

Sam McKenzie is the founder and CEO of McKenzie Restaurants, Inc., a regional company.

MCKENZIE CORPORATION’S CAPITAL BUDGETING Sam McKenzie is the founder and CEO of McKenzie Restaurants, Inc., a regional company. Sam is considering opening several new restaurants. Sally Thornton, the company’s CFO, has been put in charge of the capital budgeting analysis. She has examined the potential for the company’s expansion and determined that the success of the new restaurants will depend critically on the state of the economy over the next few years. McKenzie currently has a bond issue outstanding...

Suppose you are now a Founder and CEO of Rent the Dresses, Inc., an online rental...

Suppose you are now a Founder and CEO of Rent the Dresses, Inc., an online rental site for premium dresses primarily for women. Because the business is a start-up, there is no accountant on the management team yet, so you have been doing the accounting. You notice that an average of 100,000 visitors come to your website, of which 60% browse through the website. 20% of them register and put at least one item in the shopping cart. One out...