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?

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jitushashi120 jitushashi120 · Answer 1 · 2019-12-30T18:32:11+01:00

Answer:

11.57 is the book value per share.

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= [tex]\frac{(Total\ equity+ Accumulated\ earnings)}{ number\ of\ outstanding\ shares}[/tex]

First, lets find out accumulated earning.

Accumulated earning= [tex]Net\ income- Dividend\ paid[/tex]

Accumulated earning= [tex]\$ 250000 - \$ 100000= \$ 150000[/tex]

∴Accumulated earning= $ 150000.

Now, Book value per share= [tex]\frac{\$ 2,050,000+ \$ 150000 }{\$ 190000}[/tex]

⇒ Book value per share= [tex]\frac{2200000}{190000} = \$ 11.57[/tex]

∴ Book value per share= $11.57.