Book Value Calculation Example

The company has the policy to depreciate all assets annually using the straight line method of depreciation.

Book value calculation example. Therefore the calculation of book value per share will be as follows bvps total common shareholders equity preferred stock number of outstanding common shares 2 93 491 00 cr 592 18 cr. How book value of assets works. Net book value calculation example let s assume that the company jack ltd purchased plant and machinery on january 1 2011 worth 800 000 having a useful life of 10 years.

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. Calculating book value example 2. Say that medtronic nyse.

We enter our numbers as. In contrast to book value the market price reflects the future growth potential of the company. Book value per share bvps is a measure of value of a company s common share based on book value of the shareholders equity of the company.

Note that the book value of the asset can never dip below the salvage value even if the calculated expense that year is large enough to put it below this value. Book value or carrying value could be defined as the net worth of an asset that is recorded on the balance sheet and it is simply calculated by subtracting any accumulated depreciation from an asset s purchase price or the historical cost. What these numbers mean.

Book value per share is also used in the return on equity formula or roe formula when calculating on a per share basis. The calculation of book value for an asset is the original cost of the asset minus the accumulated depreciation where accumulated depreciation is the average annual depreciation multiplied by the age of the asset in years. Hp is trading at 2 0 times book value.

In the example above the asset s book value after 6 years would be 10 000 6000 or 4000. Book value may also be. You can use this book value calculator.