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 $200,000 in setting up a production plant. He believes that he could sell his patent for $50 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

Answer:

Book Value is $0.2 million

Market Value is $50 million

Book Value per share is $0.2 per share

Market Value per share is $50 per share

Explanation:

Part A. The book value of Alchemy Products Inc., is $0.2 million and its market value is $50 million.

Part B.

The Book value per share of Alchemy Products Inc., is calculated as under:

Book Value per share = $0.2 million / 1 Million shares   =  $0.2 per share

The Market value per share of Alchemy Products Inc., is calculated as under:

Market Value per share = $50 million / 1 Million shares   =  $50 per share