Question

Chester's balance sheet has $71,143,000 in equity. Further, the company is expecting net income of 4,000,000 next year, and also expecting to pay $5,000,000 in dividends. If there is no new stock issued what will be Chester's book value?

Answer 1

The Chester book value is $70,143,000, if there is no new stock issued

Step-by-step explanation:

Net income : The net income is that income which is earned by the company during a particular year. Through the use of the net income company can interpret how much company has earned profits in a particular year.

Dividend: The dividend is that amount which is paid to the shareholders and thus it would be deducted while deriving the book value.

For computing the book value, following accounting equation should be used which is shown below:

= Equity balance as per balance sheet + Net income - Expected dividend

= $71,143,000 + $4,000,000 - $5,000,000

= $70,143,000

Hence, the Chester book value is $70,143,000, if there is no new stock issued