Question

Hunter Manufacturing Inc.'s December 31, 2014 balance sheet showed total common equity of $2,050,000 and 190,000 shares of stock outstanding. During 2015, Hunter had $250,000 of net income, and it paid out $100,000 as dividends. What was the book value per share at 12/31/2015, assuming that Hunter neither issued nor retired any common stock during 2015?

Answer 1

Answer:

11.57 is the book value per share.

Explanation:

Given: Total common equity= $2050000.

           Total number of outstanding shares= 190000

            Net Income= $250000

            Dividend paid out= $100000.

We know the formula for finding book value per share at 12/31/2015.

Book value per share= $\frac{(Total\ equity+ Accumulated\ earnings)}{ number\ of\ outstanding\ shares}$

First, lets find out accumulated earning.

Accumulated earning= $Net\ income- Dividend\ paid$

Accumulated earning= $\ 250000 - \ 100000= \ 150000$

∴Accumulated earning= $ 150000.

Now, Book value per share= $\frac{\ 2,050,000+ \ 150000 }{\ 190000}$

⇒ Book value per share= $\frac{2200000}{190000} = \ 11.57$

∴ Book value per share= $11.57.