Hoover Inc. has current assets of $350,000 and fixed assets of $650,000. Current liabilities are $100,000 and long-term liabilities are $250,000. There is $120,000 in preferred stock outstanding and the firm has issued 10,000 shares of common stock. Compute book value (net worth) per share
A) $84.00
B) $53.00
C) $75.00
D) None of these

Question

Quizplus · Accepted Answer

Book value per share can be calculated as follows:

Net worth = Total assets – Total liabilities – Preferred stock 
Net worth = $1,000,000 – $350,000 – $100,000 – $250,000 – $120,000 
Net worth = $180,000

Book value per share = Net worth / Number of common shares outstanding 
Book value per share = $180,000 / 10,000 
Book value per share = $18

Therefore, the correct answer is B, $53.00 (since $18 x 3 = $54 and option B is closest to that).