You are considering a new project with a net present value of $25,000 and an initial cash outlay for fixed assets of $120,000. You are planning on funding this project by selling 2,500 new shares of stock. Currently, your firm has 45,000 shares of stock outstanding and a book value per share of $30. What will the new book value per share be if you accept this project?

Question

Quizplus · Accepted Answer

The new book value per share is calculated by adding the net present value of the project to the current book value of equity, then dividing by the new total number of shares. The current book value of equity is 45,000 shares * $30 = $1,350,000. Adding the NPV of $25,000 gives $1,375,000. The new total number of shares is 45,000 + 2,500 = 47,500. The new book value per share is $1,375,000 / 47,500 = $28.95.

You Are Considering a New Project with a Net Present