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The Hewler Corp

Finance

The Hewler Corp. is thinking about a project which requires the purchase of $800,000 of fixed assets. The NPV of the project is $80,000. 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? ( Do not use the $ sign in your answer. If your answer is $85.93, enter 85.93)Number of shares outstanding    200,000

Book value                   $2,500,000

Market value                 $3,200,000

Net income                   $600,000

Earnings per share             $3

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Computation of New Book Value per Share:

Existing Market Price = Market Value/Number of Shares Outstanding 

= $3,200,000/200,000

= $16

 

New Shares Outstanding = Existing Shares + (Fixed Asset Cost/Market Price)

= 200,000 + ($800,000/$16)

= 200,000 + 50,000

= 250,000

 

New Book Value per Share = (Existing Book Value + Fixed Asset)/New Shares

= ($2,500,000+$800,000)/250,000

= $3,300,000/250,000

= $13.20 per share

 

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