Question

Landers Nursery and Garden Stores has current assets of \(220,000 and fixed assets of \)170,000. Current liabilities are \(80,000 and long-term liabilities are \)140,000. There is $40,000 in preferred stock outstanding and the firm hasissued 25,000 shares of common stock. Compute book value (net worth)per share.

Short answer

The book value per share of Landers Nursery and Garden Stores is $5.2.

Step-by-step solution

Total assets of Landers Nursery and Garden Stores

$\begin{array}{rcl}\mathrm{Total}\mathrm{assets}& =& \mathrm{Current}\mathrm{assets}+\mathrm{Fixed}\mathrm{assets}\\ & =& \$220,000+\$170,000\\ & =& \$390,000\end{array}$

Total liabilities of Landers Nursery and Garden Stores

$\begin{array}{rcl}\mathrm{Total}\mathrm{liablity}& =& \mathrm{Current}\mathrm{liability}+\mathrm{Long}-\mathrm{term}\mathrm{liability}+\mathrm{Preference}\mathrm{Shares}\\ & =& \$80,000+\$140,000+\$40,000\\ & =& \$260,000\end{array}$

Book value per share of Landers Nursery and Garden Stores

$\begin{array}{rcl}\mathrm{Book}\mathrm{value}\mathrm{per}\mathrm{share}& =& \frac{\mathrm{Total}\mathrm{assets}-\mathrm{Total}\mathrm{liabilities}}{\mathrm{No}.\mathrm{of}\mathrm{shares}}\\ & =& \frac{\$390,000-\$260,000}{\$25,000}\\ & =& 5.2\end{array}$