Underwater Experimental is considering a project which requires the purchase of $498,000 of fixed assets.The net present value of the project is $22,500.Equity shares will be issued as the sole means of financing the project.What will the new book value per share be after the project is implemented given the following current information on the firm? $$\begin{array} { l r }
\text { Number of shares outstanding } & 60,000 \
\text { Book value } & \$ 720,000 \
\text { Market value } & \$ 936,000 \
\text { Net income } & \$ 108,000
\end{array}$$

Question

Underwater Experimental is considering a project which requires the purchase of $498,000 of fixed assets.The net present value of the project is $22,500.Equity shares will be issued as the sole means of financing the project.What will the new book value per share be after the project is implemented given the following current information on the firm? $$\begin{array} { l r } 
\text { Number of shares outstanding } & 60,000 \
\text { Book value } & \$ 720,000 \
\text { Market value } & \$ 936,000 \
\text { Net income } & \$ 108,000
\end{array}$$

Quizplus · Accepted Answer

Current market value per share = $936,000/60,000 = $15.60Number of new shares needed = $498,000/$15.60 = 31,923.08 sharesNew book value per share = ($720,000 + $498,000)/(60,000 + 31,923.08) = $13.25

Underwater Experimental Is Considering a Project Which Requires the Purchase