Question

(Share value) At the end of last year a company had 12 million shares ($2.50 par value) outstanding and total owners’ equity of $96 million. Net income in the past year was $25 million, and 11.5 million shares were outstanding on average during the year. Excel

a. What is the remaining obligation, if any, of a shareholder who purchased shares from the company at $1.00 per share?

b. What is the remaining obligation, if any, of a shareholder who purchased shares from the company at $10.00 per share?

c. Calculate the company’s book value per share at year-end.

d. Calculate the company’s earnings per share for the year.

Answer 1

a.

remaining obligation at 1 = par value - price paid

= 2.5 - 1

= 1.5

there is a obligation of $ 1.5 left at the time of liquidation

b.

remaining obligation at 10  = 1.5 - 10

= -8.5

therefore there is no obligation in the hands of the company

c.

Book value per share = shareholders equity / total number of shares outstanding

= 96 / 12

= $8

d.

Earning per share = net income / average no. of shares

= 25 / 11.5

= $2.17 per share

NOTE - PLEASE APPRECIATE THE WORK