Question

A company has a Book Value of 10,000,000 with 500,000 shares outstanding. What is book value per share?

                  1,000 shares have just been sold in the secondary market at 25/share. What is the company’s Market Value and market value per share?

                  At day’s end the company issues 20,000 new shares at a price of 24/share. At that point what is the company’s market value & market value/share; and its book value & book value/share?

Answer 1

A company has a Book Value of 10,000,000 with 500,000 shares outstanding. What is book value per share?

Book value per share = Book value / Outstanding share = 10,000,000 / 500,000

= 20 per share

.

                  1,000 shares have just been sold in the secondary market at 25/share. What is the company’s Market Value and market value per share?

Market value = Total outstanding share x Sales price of share = 500,000 x 25 per share

= 12,500,000

Marker value per share = 25 per share (Given)

.

                  At day’s end the company issues 20,000 new shares at a price of 24/share. At that point what is the company’s market value & market value/share; and its book value & book value/share?

.

New issue price = 24 per share

.

Total outstanding revised = 500,000 + 20,000 = 5,20,000

.

Market value = Total outstanding revised x New Issue price = 5,20,000 x 24

= $12,480,000

.

Market value per share = 24 per share (given)

.

Book value = Total outstanding revised x Book value per share = 5,20,000 x 20

= 10,400,000

.

Book value per share = 20 per share (calculated initially)