Professor Diehard found an effective antibiotic for the DEPRESS bacteria,and patented the drug.He believes that he could sell the patent for $20 million.He then formed a corporation and invested $400,000 in setting up a production plant.There are 2 million shares of stock outstanding.If the professor's belief is correct,what would be the price per share and the book value per share?

Question

Quizplus · Accepted Answer

Book value equals the $400,000 Professor Diehard has contributed in tangible assets. Market value equals the value of his patent plus the value of the production plant, or $20.4 million. Price per share = $20.4 million/2 million shares = $10.20. Book value per share = $400,000/2 million shares = $0.20.

Professor Diehard Found an Effective Antibiotic for the DEPRESS Bacteria,and