Question

Acme Widget, Inc. has 1,000 shareholders who own a total of one million shares of its common stock. The company earned $10 million after taxes and paid out $4 million in dividends. The firm has assets of $125 million and liabilities of $25 million. What is the book value per share

Answer 1

The book value per share for Acme Widget, Inc. is calculated by subtracting the total liabilities from the total assets and then dividing by the total number of shares. The book value per share for this company is $100.

Step-by-step explanation:

We need to calculate the book value per share for Acme Widget, Inc. The book value is derived from the company's financial statements, and it represents the net value of the firm's assets less its liabilities. In other words, book value is the company's total tangible assets less the total liabilities. To find the book value per share, we use the formula:

Book Value Per Share = (Total Assets - Total Liabilities) / Total Outstanding Shares

According to the question, Acme Widget, Inc. has assets of $125 million and liabilities of $25 million. The total number of outstanding shares is one million. Therefore, we calculate the book value per share as follows:

1. Subtract the total liabilities from the total assets: $125 million - $25 million = $100 million.
2. Divide this number by the total number of outstanding shares: $100 million / 1 million shares = $100 per share.

The book value per share for Acme Widget, Inc. is $100.