MHB 30 Calculate the book value per share

[karush]

$\text{$32$}$

$\text{Newmarket Industries currently has $2,000$ shares of common stock outstanding. }$
$\text{The Firm has assets of $\$200,000$ and total liabilities including preferred stock of $\$75.000$.}$
$\text{Calculate the book value per share of Newmarket common stock}$

$$\frac{200,000+75,000}{2,000}=\frac{275}{2}=137.5 \text{ per share}$$

just looks too large

 

[MarkFL]

I would think book value per share would be equity per total shares...and equity is assets less liabilities...:)

 

[karush]

I would think book value per share would be equity per total shares...and equity is assets less liabilities...:)

What is equity per total shares...?

 

[MarkFL]

What is equity per total shares...?

That would be the equity (assets minus liabilities), divided by the total number of shares. :)

 

[karush]

$\frac{200,000-75,000}{2,000}=\frac{25}{2}=12.5 \text{ per share}$

this?

 

[MarkFL]

$\frac{200,000-75,000}{2,000}=\frac{25}{2}=12.5 \text{ per share}$

this?

Not quite...

$$\text{Book Value Per Share}=\frac{\$200000-$75000}{2000}=\$67.50\text{ per share}$$

 

[karush]

Ok well
I never learned basic arithmetic

 

[MarkFL]

Ok well
I never learned basic arithmetic

I think everyone here runs into issues with basic arithmetic from time to time, except one particularly careful individual. (Bandit)

 

[HallsofIvy]

The original mistake was not "arithmetic" but perhaps not understanding what "liabilities" are. Liabilities are money you owe so you subtract liabilities from value, not add them.