Question

The founder of Alchemy Products, Inc., discovered a way to turn lead into gold and patented this new technology. He then formed a corporation and invested $1,200,000 in setting up a production plant. He believes that he could sell his patent for $48 million. a.What are the book value and market value of the firm? (Enter your answers in dollars not in millions.) Book value$ Market value$ b.If there are 2 million shares of stock in the new corporation, what would be the price per share and the book value per share? (Round your answers to 2 decimal places.) Price per share$ Book value per share$

Answer 1

Answer:

a. The book value and market value of the firm is  $1,200,000 and $49,200,000 respectively

b. The price per share and the book value per share is $24.60 and $0.60 respectively

Explanation:

a. The computation of the book value and market value of the firm is shown below:

The book value = Invested amount = $1,200,000

The market value = Invested amount + sales value

                             = $1,200,000 + $48,000,000

                             = $49,200,000

b. The computation of the price per share and the book value per share is shown below:

Price per share = Market value of firm ÷ Number of shares

                          = $49,200,000 ÷ $2,000,000

                          = $24.60

Book value per share = Book value of firm ÷ Number of shares

                          = 1,200,000 ÷ $2,000,000

                          = $0.60