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ABC Inc.’s December 31, 201 0 balance sheet showed total common equity of $4,000,000
and 200,000 shares of stock outstanding. During 2011, the firm had $450,000 of net income, and
it paid out $1 5 0,000 as dividends. Suppose no new common stock was issued or retired during
2011. The book value per share at the end of fiscal 2011 should be: a. $2 1 . 5 0 b. $22.00 c .
$23.10 d. $24.26 e. $25. 47
Solution
Total book value = total book value in previous year + (net income – divided)
= $4,000,000 + (450,000 -150,000)
= $4,300,000
Book value per share = total book value/ no. of shares outstanding
= $4,300,000 / 200,000
= $21.50

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