Book Value Of Capital Formula

To make this easier convert total book value to book value per share.

Book value of capital formula. The formula for calculating book value per share is the total common stockholders equity less the preferred stock divided by the number of common shares of the company. Book value may also be. It can be useful to compare the market price of shares to the book value.

For assets the value is based on the original cost of the asset less any depreciation amortization or impairment costs made against the asset. Divide 35 million by 1 4 million shares for a book value per share of 25. The book value per share bvps is calculated by taking the ratio of equity available to common stockholders against the number of shares outstanding.

Book value formula calculates the net asset of the company derived by total of assets minus the total liabilities. In accounting book value is the value of an asset according to its balance sheet account balance. Suppose a company has a book value of 35 million and there are 1 4 million common shares outstanding.

Weighted average cost of capital wacc is defined as the weighted average of cost of each component of capital equity debt preference shares etc where the weights used are target capital structure weights expressed in terms of market values. Bvps frac total shareholder equity preferred equity total outstanding. Alternatively book value can be calculated as the sum total of the overall shareholder equity of the company.

When compared to the current market value per share the book value per share can provide information on how a company s stock is valued. Book value is typically shown per share determined by dividing all shareholder equity. If the value of bvps exceeds the market value per share the.

Stockholders equity stockholders equity also known as shareholders equity is an account on a company s balance sheet that consists of share capital plus. We will discuss the difference between book value wacc and market value weights and why market value weights are preferred over book value weights. Book value of equity formula it is calculated by adding the owner s capital contribution treasury shares retained earnings and accumulated other incomes.