Question

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 $400,000 in setting up a production plant. He believes that he could sell his patent for $24 million.

a. What are the book value and market value of the firm?

b. If there are 1 million shares of stock in the new corporation, what would be the price per share and the book value per share?

Answer 1

a) $ 400000, $ 24.4 million b) $ 24.4, $ 0.4

Step-by-step explanation:

His book value represent the valuable assets he contributed and this is $ 400000 invested in the production plant

the market value = the worth of his patent + his investment in production plant = $ 24 million + $ 400000 = $ 24.4 million

b) the price per share = $ 24.4 / 1 million = $ 24.4

the book per share value = $ 400000 / 1 million = $ 0.4