Question

The founder of Alchemy Products Inc. discovered a way to turn gold into lead and patented this new technology. He then formed a corporation and invested $100,000 in setting up a production plant. He believes that he could sell his patent for $24 million. a. What is the book value of the firm? (Enter your answer in dollars not in millions.) b. What is the market value of the firm? (Enter your answer in dollars not in millions.) c. If there are two million shares of stock in the new corporation, what would be the price per share? (Round your answer to 2 decimal places.) d. What would be the book value per share? (Round your answer to 2 decimal places.)

Answer 1

(A) $100,000

(B) $24,100,000

(C) $12.05 per share

(D) $0.05 per share

Step-by-step explanation:

The founder of Alchemy product incorporation found out how to turn gold into lead

He formed a corporation and invested $100,000 in setting up a production plant

He believes that he can sell his patent for $24,000,000

(A) The book value of the firm is $100,000

(B) The market value of the firm is $100,000 + 24,000,000

= $24,100,000

(C) The price per share is

= 24,100,000/2,000,000

= $12.05 per share

(D) The book value per share is

= 100,000/2,000,000

= $0.05 per share