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New book value per share upon equity issue

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JL Enterprises has 75,000 shares of stock outstanding, with a book value of $900,000 and a market value of $1,320,000. The firm is considering a project that requires the purchase of $130,000 in fixed assets and has a net present value of $7,500. The project would be all-equity financed through the sale of shares. What will the new book value per share be after the project is implemented?

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Solution Summary

The solution shows the effect of change in the book value per share upon new equity financing for a project.

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Solution:

Market price per share = $1,320,000 / 75000 shares = $17.60 per share
Number of new shares that ...

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Radhika Lakshmi, MPhil
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  • MCom, Annamalai University
  • IATA, International Air Transport Association
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