Question

Hunter Manufacturing Inc.'s December 31, 2014 balance sheet showed total common equity of $2,050,000 and 190,000 shares of stock outstanding. During 2015, Hunter had $250,000 of net income, and it paid out $100,000 as dividends. What was the book value per share at 12/31/2015, assuming that Hunter neither issued nor retired any common stock during 2015?

Answer 1

11.57 is the book value per share.

Step-by-step explanation:

Given: Total common equity= $2050000.

Total number of outstanding shares= 190000

Net Income= $250000

Dividend paid out= $100000.

We know the formula for finding book value per share at 12/31/2015.

Book value per share=
`((Total\ equity+ Accumulated\ earnings))/( number\ of\ outstanding\ shares)`

First, lets find out accumulated earning.

Accumulated earning=
`Net\ income- Dividend\ paid`

Accumulated earning=
`\$ 250000 - \$ 100000= \$ 150000`

∴Accumulated earning= $ 150000.

Now, Book value per share=
`(\$ 2,050,000+ \$ 150000 )/(\$ 190000)`

⇒ Book value per share=
`(2200000)/(190000) = \$ 11.57`

∴ Book value per share= $11.57.