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 $1,400,000 in setting up a production plant. He believes that
he could sell his patent for $50 million.
| a. |
What are the book value and market value of the firm? (Enter your answers in dollars not in millions.)
|
| 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.)
|
Explanation:
a.
|
Book
value equals the $1,400,000 the founder of the firm has contributed in
tangible assets. Market value equals the value of his patent plus the
value of the production plant: $50,000,000 + $1,400,000 = $51,400,000.
|
b.
| Price per share = $51.4 million/2 million shares = $25.70 |
| Book value per share = $1,400,000/2 million shares = $0.70 |
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