MESMER ANALYTIC, A BIOTECHNOLOGY FIRM, FLOATED AN INITIAL PUBLIC OFFERING OF 2,000,000 SHARES AT A PRICE OF $5.00 PER SHARE. THE FIRM'S OWNER HELD 60 PERCENT OF THE COMPANY'S $1.00 PAR VALUE AUTHORIZED AND ISSUED STOCK FOLLOWING THE PUBLIC OFFERING. ONE MONTH AFTER THE IPO, THE FIRM'S BOARD OF DIRECTORS DECLARED A ONE-TIME DIVIDEND OF $0.50 PER SHARE PAYABLE TO ALL STOCKHOLDERS, MEANING THAT THE OWNER WOULD RECEIVE AN IMMEDIATE DIVIDEND, IN PART OUT OF THE POCKETS OF THE NEW PUBLIC STOCKHOLDERS. WHAT WAS THE BOOK VALUE PER SHARE OF THE FIRM BEFORE AND AFTER THE SPECIAL DIVIDEND WAS PAID?
First, we need to find the total number of shares in the company. Since the owner will held 60% of the company's stock following the public offering, then it means that the new shares of IPO is comprised of 40% of the company's stock.
Total company's stock = 2,000,000 shares/40% = 5,000,000 shares
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