Question

Digby's balance sheet has $85,185,000 in equity. Further, the company is expecting net income of 3,000,000 next year, and also expecting to issue $4,000,000 in new stock. If there are no dividends paid what will beDigby's book value?

Answer 1

Answer:

Digby's Book Value:                       $        

Book value of existing equity    85,185,000

Book value of additional equity 4,000,000

Net income                                  3,000,000

Digby's total book value             92,185,000

Explanation:

The book value of Digby is the aggregate of book value of existing equity, book value of additional equity issued and net income.